Line a 9 x 9 baking pan with aluminum foil sprayed with oil.
Sprinkle gelatin over 1/2 cup water in the bowl of a stand mixer to soften.
Heat sugar, corn syrup, salt and remaining 1/2 cup water in a small saucepan over low heat, stirring until sugar has dissolved.
Raise heat to medium and bring to a boil, swirling occasionally, don’t stir or scrape down the sides. Continue boiling until a candy thermometer reaches 240, or soft ball stage. Remove from heat.
With mixer at low speed, pour hot syrup into the softened gelatin slowly, until incorporated.
Crank the mixer up to high and beat like crazy for 15 minutes, it will be really fluffy and thick.
Add the vanilla and beat 1 minute more.
Pour into 9 x 9 pan, smooth the top as best you can.
Let stand, uncovered at room temp until firm, about 1-2 hours.
Mix up the peppermint dust while the marshmallows cool. Grind the candy canes into a fine powder with a spice mill/coffee mill/food processor. Add some cornstarch to the mix. Just eyeball it, I use about half candy canes, half cornstarch. The cornstarch keeps things from getting too sticky.
Dump the marshmallows onto a cornstarch-dusted cutting board. Cut into strips and cubes as you see fit, dredging in the peppermint stick powder as you cut.
Space the marshmallows out on a well dusted baking sheet, and allow to dry overnight before storing in a covered container.