Butter a 9-inch round cake pan.
For the "cake": Melt the butter in a large pot over medium heat. Add the marshmallows, and cook, stirring occasionally, until they melt completely, about 5 minutes. Remove the pot from the heat, and stir in the vanilla and a pinch of salt. Add the cereal and sprinkles, and stir with a rubber spatula, scraping up from the bottom, until the cereal is completely coated. Transfer the cereal to the prepared cake pan, and pat it down into an even layer. Let sit at room temperature until firm, about 30 minutes. Invert onto a serving plate.
For the frosting: Heat the marshmallows and butter in small saucepan over medium-low heat, stirring constantly, until completely melted. Remove the saucepan from the heat, and stir in the icing sugar.
Spread the frosting over the top of the "cake" in an even layer. Decorate with sprinkles. Cut into wedges, and serve. (The frosted "cake" can be stored in an airtight container at room temperature for up to 3 days.)
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