Dissolve yeast and 1/4 cup sugar in 1/2 cup warm water in a small bowl; let stand 5 minutes.
Weigh or lightly spoon flours and potato starch into dry measuring cups; level with a knife. Combine flours, potato starch, xanthan gum, and salt in a large bowl; add yeast mixture, yogurt, vanilla, and egg. Beat at medium-high speed until blended.
Turn dough out onto a lightly floured surface; shape into a ball. Place dough in a large bowl coated with cooking spray; cover loosely with plastic wrap, and let rise in a warm place (85°), free from drafts, 1 hour.
Turn dough out onto a well-floured surface; knead lightly 4 to 5 times with floured hands. Roll dough to 1/2-inch thickness; cut with a 1-inch biscuit cutter. Place on a baking sheet lined with parchment paper. Repeat procedure with remaining dough. Let rise in a warm place (85°), free from drafts, 30 minutes.
Place 1/4 cup sugar, orange rind, and cinnamon in a food processor; process until well blended.
Add oil to a large Dutch oven to a depth of 2 inches. Heat oil over medium-high heat until thermometer registers 360°. Place 8 to 10 donut holes in hot oil; cook 1 minute or until golden brown, stirring occasionally. Remove using slotted spoon; drain on paper towels. Repeat procedure with remaining donut holes.
Combine donut holes and sugar mixture in a bowl; toss gently to coat. Serve warm.
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