Prepare a 9x13" baking pan as follows: spray it lightly with canola oil. Mix 1/4 cup powdered sugar and 1/4 cup cornstarch together, then pour it into the baking pan. Turn the pan around to coat it evenly with the cornstarch mixture. Pour excess into a dish and save it for later (don't discard - you will need it).
Sprinkle 2 1/2 Tablespoons unflavored gelatin over 1/2 cup of the cold water in the bowl of a stand mixer.
Heat 12 ounces granulated sugar, 12 ounces granulated sugar, and the remaining 1/2 cup cold water over medium-high heat in a medium (at least 1.9 quart or 1.7 liter), covered saucepan for 3-4 minutes. Remove the lid and begin to monitor the temperature with an instant-read thermometer. Continue cooking until the temperature reaches 240°F. The mixture will begin to boil vigorously before the temperature is reached.
Once the temperature reaches 240°F, immediately remove from heat (the sugar mixture will burn if left on the heat too long). Turn the stand mixer on low and carefully pour the hot sugar mixture slowly down the side of the bowl. Once it has all been added, turn the mixer to high speed. Continue whipping until the marshmallow is white, lukewarm, and very thick. Add 1 teaspoon vanilla extract and continue mixing for another minute.
Pour whipped marshmallow into the baking pan, spreading it evenly with an oiled spatula. Sprinkle the top with leftover cornstarch mixture, saving excess for later. Let sit uncovered for at least 4 hours.
When marshmallow is set, cut it with a greased knife or cookie cutters in desired shapes. Toss cut marshmallows with remaining cornstarch mixture to coat.
To coat in chocolate: melt your desired chocolate in a double boiler (or a heat proof bowl set over a pot with a small amount of simmering water) with coconut oil or shortening. Dip marshmallows in chocolate, shake off excess and place on a baking sheet lined with wax paper. Decorate with sprinkles if desired.