LINE 9-inch-square baking pan with foil.
COMBINE sugar, evaporated milk and butter in medium, heavy-duty saucepan. Bring to a full rolling boil over medium heat, stirring constantly. Boil, stirring constantly, for 4 1/2 to 5 minutes. Remove from heat.
STIR in marshmallows, morsels, 1 cup peanuts and vanilla extract. Stir vigorously for 1 minute or until marshmallows are melted. Pour into prepared baking pan. Coarsely chop remaining peanuts. Sprinkle over fudge; press in. Refrigerate until firm. Lift from pan; remove foil. Cut into 48 1-inch squares.