In small bowl, combine powdered sugar and enough water for desired spreading consistency; beat until smooth. Frosting should be fairly stiff.
For each ornament, spread 1 tablespoon frosting on back side of 1 cookie. Fold licorice piece in half to form loop. Place 1 loop at head end of cookie, with cut ends in frosting. Press back of another cookie against filling to form sandwich.
Decorate as desired using remaining frosting to attach candy. Let stand about 15 minutes or until set before hanging.