Process sugar and butter in a food processor until very creamy, scraping sides as needed, 1 to 2 minutes. Add the eggs and yolks, one at a time, pulsing after each addition. Add the milk, water, and vanilla and process to blend.
Whisk both flours, baking powder, and salt in a medium bowl. Add the dry ingredients, in 3 batches to the wet, pulsing, and then scraping batter off the sides of the processor as needed after each addition. Process until the batter is very smooth and pourable like pancake batter, about 2 minutes.
Evenly pour the batter into the prepared cups, filling them 3/4 of the way full. Bake until the cakes are just firm and spring back when gently pressed, and the tops are golden, 18 to 25 minutes. Cool slightly in tin, and turn out of tin when cool enough to handle. Cool cupcakes completely on a rack before frosting.
For the frosting, whisk the milk and vanilla extract together in a small bowl.
Slowly beat the butter and sugar, in another medium bowl, with an electric mixer until incorporated. Raise the speed to high and mix until light and fluffy, about 5 to 7 minutes. (Occasionally turn the mixer off, and scrape the sides of the bowl down with a rubber spatula.) Add the fluff and salt and reduce the speed to low. Add the milk and vanilla mixture, scrape the bowl down, and mix until fully incorporated. Raise the mixer to high and beat briefly until fluffy, about 1 to 2 minutes. Use immediately.
To decorate the cupcakes, frost the cupcake. Place the large marshmallow in the centre. Lightly frost candy eyes and press onto the marshmallow. Frost the back of the jujube candy and put below eyes to for a nose. Frost the short piece of liquorice lightly and press underneath the nose to make the mouth. Press mini-marshmallows all around the cupcakes and the face to make the lambs coat. Frost the tips of the pink jelly beans to make ears. Stick the purple jelly beans in the front and back of the cupcake for feet. Curl the long piece of liquorice and press into frosting to make the lamb's tail.