Beat the butter and granulated sugar in a large bowl with a mixer on medium-high speed until light and fluffy, 3 to 5 minutes. Add the egg and vanilla and beat until incorporated. Reduce the mixer speed to low; add the flour mixture in 2 batches and beat until just incorporated. Divide the dough in half, wrap in plastic wrap and refrigerate until firm, at least 1 hour and up to 1 day.
Line 2 baking sheets with parchment paper. Working with 1 piece of dough at a time, lightly dust the dough with flour and roll out between 2 pieces of parchment paper until about 1/8 inch thick. Refrigerate until slightly firm, about 15 minutes. Cut out shapes using 2-to-4-inch cookie cutters and transfer to the prepared baking sheets. Gather the scraps and refrigerate until firm; reroll once to cut out more cookies. Refrigerate the cutouts until firm, about 30 minutes.
Position racks in the upper and lower thirds of the oven; preheat to 350 degrees F. Bake the cookies, switching the position of the pans halfway through, until just golden, 13 to 15 minutes. Let cool 5 minutes on the baking sheets, then transfer to racks to cool completely.
Meanwhile, make the icing: Sift the confectioners' sugar and meringue powder into a large bowl. Beat in 6 tablespoons water with a mixer on medium speed until soft, glossy peaks form. Spread on the cookies and decorate with nonpareils. Let set, about 1 hour.
Photograph by Johnny Miller
Recipe courtesy Food Network Magazine