Stir together first 3 ingredients in a Dutch oven over low heat, and cook, stirring often, 8 minutes or until marshmallows melt. Add cereal, stirring until well blended.
Spoon mixture evenly into 16 lightly greased muffin pan cups. Press with wax paper to compact. Press an indentation in centers, forming a nest, and let cool completely. Remove nests, and fill centers with pastel chocolate pieces.
Peanut-Butter Birds' Nests: Reduce marshmallows to 2 cups, and substitute 1/2 cup creamy peanut butter for butter. Proceed as directed.