Heat oven to 400°F. In large bowl, beat butter, 1/2 cup powdered sugar and the vanilla with electric mixture on medium speed until well mixed. On low speed, beat in flour, salt and walnuts.
For each cookie, shape scant measuring tablespoonfuls dough around chocolate star to make 1-inch ball; place 2 inches apart on ungreased cookie sheets.
Bake 12 to 15 minutes or until set and bottoms begin to turn golden brown. Meanwhile, in small bowl, mix sugar coating ingredients.
Immediately remove cookies from cookie sheets; roll in sugar coating. Cool completely on cooling racks, about 30 minutes. Roll in sugar coating again.