Marshmallow Fondant Recipe:
16 oz bag of mini marshmallows
2 lb bag of confectioner's sugar (plus more for rolling out)
4 Tbsp water
1 tsp vanilla extract (or any other extract/liquid flavoring)
crisco (for your hands)
gel food coloring, if desired
When the marshmallows are heated, add the 4 Tbsp water, and the extract/flavoring you're using (I've done vanilla, almond, root beer, and bacon before, all with great results - but some extracts/concentrates, like root beer, are so dark, they'll tint the fondant. Keep that in mind when choosing your flavoring - if you want to make white or light fondant, you can't use a dark extract. Also, Wilton has several clear extracts available for just this purpose, but I've never had an issue with regularly colored vanilla affecting the white color), If you're coloring the entire batch of fondant one color, it's easiest to add the food coloring at this point. Otherwise, leave it white and you can add coloring to pieces later, as desired.
And now the fun part. Reserve 1 cup of the sugar and set aside. Then gradually start adding the rest of the confectioner's sugar, stirring until mostly combined after each addition. The mixture will get stickier and stiffer with each addition. Add in all the sugar (except the reserved 1 cup) while the mixture is in the bowl.
I just dip my hands into my crisco jar...
Now, with coated hands, begin to kneed the reserved confectioner's sugar into the fondant ball, adding more as needed to combat the stickiness. Also, make sure you regularly lift the fondant and put more sugar beneath it, or it will stick terribly on the surface you're using. Usually, somewhere in the beginning of this process, I have a freak-out moment when I feel like I MUST have done something wrong this time - the fondant is TOO hard to manage, coating my hands, sticking to the counter, being too goopy, etc. It's best to just try and work through the panic. Chances are, you're doing it right. :)
Coated hands: don't panic, it's SUPPOSED to be a giant mess!
Becoming stiffer - turning into actual fondant!
Now that your fondant has refrigerated overnight, it's almost ready to use. If you need to color it, divide it into the sections to color and let them warm to room temperture, or at least an hour (covered, to keep dust, etc off of them). Whenever you do anything with the fondant, have a good deal of confectioner's sugar on hand, and use it liberally. The best way to keep it from sticking is to use tons of excess sugar. If there's sugar on the fondant when you put it on a cake, don't worry, it can easily be smoothed away, or it will absorb into the fondant while the cake sits in the fridge.
To cover a cake with fondant, you first need to crumb-coat the cake with a layer of frosting. Crumb-coating is just putting a layer of frosting over your cake and smoothing out any crumbs of imperfections on the cake. You can frost the cake and then use the fondant over it immediately, but for the best results, you should crumb-coat the cake the night before and refrigerate it overnight (along with the fondant). The fondant will stick well to the cool, hardend frosting, and the cake will stand up to the fondant better if it's chilled and slightly hardened (you're also less likely to accidentally smoosh the cake if it's chilled).
Stacked cake before crumb-coating:
Crumb-coated cakes, waiting overnight for fondant:
To fondant a cake, let the fondant warm up slightly (though with marshmallow fondant, if it's at room temperature, it's much more likely to tear and stick), then roll it out on a heavily sugared surface. It helps to flip the fondant several times during the rolling out process and throw extra sugar underneath. Also, make sure you don't knick it with your fingernails, as that will leave infuriating marks in it.
Roll out a piece that it bigger than the cake you're trying to cover. Using your sugar-coated rolling pin, you can wrap the fondant around itself (very, very loosely), and you can "roll" it back out onto the cake. Begin in the center and smooth the fondant out toward the sides (make sure you don't pull it, as it will tear easily). Fold gently over corners/curves. Once the fondant is in place, you can rub it gently with your hands to get a smooth effect. For the excess around the base of the cake, I use the backside of a butter knife blade (the rounded, not serrated side) to gently "cut" the excess at the edge of the cake. However, even with professional tools, fondant has a tendency to look ragged at the edges, which is why fondant cakes usually have a border at their base (aside from giving the cake a more "completed" look).
To stick fondant decorations on a fondant-covered cake, use a tiny, tiny bit of water. I dip just the very tip of my finger in a shallow bowl of water and put a dab on the back of the piece I want to adhere, then stick it on. It will basically glue it there.
For molding fondant, treat it just like modeling clay, but use confectioner's sugar liberally to prevent sticking. I've found the store-bought Wilton brand of fondant is best for things you need to harden very stiffly. Marshmallow fondant WILL harden if left out overnight (or several days), but the Wilton stuff harderns faster and stiffer.
Also, I leave all my cakes in the fridge, but be warned, marshmallow fondant will "sweat" when removed from the fridge, until it reaches room temperature. It won't affect the cake in anyway, except it gives it a wet look until it's at room temperature. I'm always nervous my cakes will melt if I leave them out (or the fondant will get dirty, or stiffer), so I don't mind the sweating look. If you're opposed to the wet look (which, again, is only temporary - but if you take a cake out at the beginning of a party, expect it to look extra shiny at the party), either leave the cake out entirely, or remove it from the fridge several hours before it's needed.
I think that's it! Please feel free to ask me any questions about this process, or let me know if I left anything out/didn't make something clear. Good luck, and always keep in mind: fondant can make me more angry than anything (I call it the "fondant rages"), but the joy you then feel after it actually turns out is one of the best feelings in the world. Just keep at it, and, when it doubt, add more sugar. :D
My sugar-coated kitchen after fondanting the minions: