How to Make It
Process cereal squares in a food processor until powdery, about 30 seconds. Place powdered cereal in a medium bowl; add flour, and stir to combine. Set aside.
Beat butter and 1/2 cup of the powdered sugar with a heavy-duty electric stand mixer on medium speed until creamy, about 2 minutes. Add egg and vanilla, and beat 30 seconds. Gradually add flour mixture to butter mixture, beating on medium-low speed just until combined.
Turn dough out onto a lightly floured sheet of parchment paper, and roll to 1/4-inch thickness. Transfer dough and parchment paper to a baking sheet, and chill 15 minutes.
Preheat oven to 375°F. Cut dough with a lightly floured 3 1/2-inch skull-shaped cookie cutter; place skulls 1/2 inch apart on 2 parchment paper-lined baking sheets. Re-roll scraps and repeat procedure to make 14 skulls. Bake cookies in preheated oven until lightly browned around edges, 8 to 10 minutes. Transfer cookies to a wire rack, and cool completely, about 30 minutes.
Whisk together remaining 3 cups powdered sugar, meringue powder, and 3tablespoons of the water in a medium bowl. Whisk in remaining 1 tablespoon water, 1teaspoon at a time, until icing reaches desired consistency. Frost cookies, and decorate with assorted cereals. Let stand until icing is dry, at least 15 minutes, before serving.