PREHEAT oven to 350° F. Grease 13 x 9-inch baking pan.
BEAT butter and 1 cup granulated sugar in large mixer bowl until fluffy. Beat in egg. Beat in 2 cups flour. Stir in 1 cup morsels. Spread mixture in prepared pan. Spread jam evenly over mixture in pan, leaving 1/2-inch border.
COMBINE 1 cup flour and 1/4 cup granulated sugar in medium bowl. Cut in 1/4 cup butter with pastry blender or two knives until mixture is crumbly. Stir in remaining morsels. Sprinkle streusel evenly over preserves.
BAKE for 40 to 45 minutes or until top is golden brown. Cool completely in pan on wire rack. Cut into bars.
COMBINE powdered sugar, milk and vanilla extract in small bowl. Drizzle over bars; let stand until set.