Microwave in 30-second intervals, stirring after each. After about 2 1/2 minutes total, marshmallows will be smooth and melted. Add flavoring at this point, if desired (such as clear vanilla flavoring).
It's best to allow Marshmallow Fondant to sit, double-wrapped, overnight. Prepare the fondant for storing by coating with a thin layer of shortening, wrap in plastic wrap and the place in Ziploc bag. Squeeze out as much air as possible. Will keep in refrigerator for several weeks.
My package of marshmallows was 10.5 oz so I use a little less than the whole bag and halve the other ingredients, or I use a bag & a half with the regular amounts of the other ingredients.
Living here in AZ, I start with 1/4 c water (4 T) and usually don't need too much more, unless my marshmallows are stale.
When ready to use, knead it until its smooth and roll out to 1/8" thick. Sprinkle powdered sugar on the counter & rolling pin before rolling out. The way I color fondant is to put on plastic/latex gloves (like medical gloves) and knead food coloring into small amounts of the fondant.
That's how I got the red, yellow, and black for those little Hello Kitty faces shown. Those, by the way, went on top of each cupcake for my twin girls' 6-yr-old party guests. Such fun.
I have used this for several cakes since then, and been very happy with the results. My favorite thing about it is that it tastes good, as well as looking good.