Make the cupcakes: Preheat the oven to 350 degrees F and line a 12-cup muffin pan with paper liners. Whisk the flour, baking powder, salt, baking soda and nutmeg in a medium bowl.
Beat the butter and granulated sugar in a large bowl with a mixer on medium speed until creamy, about 2 minutes. Add the egg and vanilla and beat until fluffy, about 3 more minutes. Reduce the speed to low; add the flour mixture and beat until just incorporated, about 1 minute. Add the sour cream and beat until light and fluffy, about 2 more minutes.
Divide the batter among the muffin cups. Bake until a toothpick inserted into the center comes out clean, about22 minutes. Let sit until cool enough to handle, then gently press the back of a small spoon into the center of each cupcake to make an indentation. Fill each indentation with a few teaspoons of cranberry sauce. Remove the cupcakes to a rack to cool completely.
Meanwhile, make the frosting: Beat the butter and 1 cup confectioners' sugar in a large bowl with a mixer on medium speed until combined, about 2 minutes. Reduce the mixer speed to medium low; gradually add the remaining 2 cups confectioners' sugar and beat until fluffy, about 2 minutes. Increase the speed to medium high; beat in the cranberry sauce, vanilla and salt until combined. Spread the frosting on the cupcakes and top with dried cranberries.