Cook first 6 ingredients in a Dutch oven over medium-low heat, stirring occasionally, 10 minutes or until thoroughly heated. (Do not boil.)
Sprinkle sugar onto wax paper; place marshmallows 2 inches apart on paper. Sprinkle with sugar, and top with wax paper. Flatten marshmallows with a rolling pin. Remove top sheet of wax paper, and cut marshmallows with Halloween cutters. Decorate with frosting, and serve in hot cocoa.