Line a 15x10x1-in. pan with foil. Grease the foil and 3-in. cookie cutters with 1 tablespoon butter. Place cookie cutters in pan; set aside.
In a large heavy saucepan, combine the sugar, milk and remaining butter. Cook and stir over medium heat until mixture comes to a full rolling boil. Remove from the heat; stir in marshmallows until melted. Add unsweetened chocolate and chocolate chips; stir until chips are melted. Stir in nuts and vanilla.
Spoon warm fudge into the prepared cookie cutters, filling to the top. Cool until set. To remove, gently push fudge out of cookie cutters. Tint frosting red and green; decorate fudge with frosting and M&M's.
Editor's Note: Instead of using cookie cutters, fudge can be prepared in a foil-lined buttered 13-in. x 9-in. x 2-in. baking pan and cut into squares.