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Spray 9-inch square baking dish with no stick cooking spray then coat with some of the confectioners’ sugar. Set aside. Microwave 1/2 cup of the water, granulated sugar and corn syrup in medium microwavable bowl on HIGH 7 minutes. Stir to dissolve sugar. Microwave on HIGH 5 minutes longer. (Mixture will have a slight yellow tint.) Carefully remove hot bowl from microwave.
Meanwhile, place remaining 1/2 cup water in mixer bowl. Sprinkle with gelatin. Let stand 5 minutes. Gradually beat in hot syrup mixture with whisk attachment on medium-low speed. Beat 8 minutes. Increase speed to medium-high. Beat 10 to 12 minutes longer or until mixture is fluffy, shiny and at least tripled in volume. Beat in vanilla.
Spread marshmallow mixture in prepared pan. Smooth top with a spatula. Sift about 2 tablespoons of the confectioners’ sugar over top. Let stand at room temperature overnight or refrigerate at least 3 hours.
Place remaining confectioners’ sugar in large bowl. Cut marshmallows into 1 1/2-inch squares. Add marshmallows in batches to confectioners’ sugar; toss to coat well. Shake off excess. Store marshmallows in airtight container at room temperature up to 3 days.