Heat oven to 350°F.  Grease two 8" round pans, then cut a circular piece of parchment paper to fit and place it in the bottom of the pan.

In a large bowl, stir or sift together the sugar, flour, cocoa, baking powder, baking soda and salt.  Add eggs, milk, oil and vanilla and beat for 2 minutes. Stir in coffee; I don't recommend beating it in because it'll be thin and fly everywhere.  Pour batter evenly into your prepared pans.

Bake 30 to 35 minutes, or until wooden pick inserted in center comes out clean. Allow the cakes to cool in the pans for 10 minutes, then remove from pans to wire racks and cool completely before frosting.

Cream the softened butter until it is smooth, the blend in the vanilla.

Add half of the powdered sugar and most of the milk. Beat the mixture at medium speed until combined and the powdered sugar has been completely incorporated and there are no lumps.

Gradually add the remaining powdered sugar and milk, beating at medium speed another 3 to 4 minutes scraping the sides of the bowl occasionally, until the frosting is smooth.

Add the marshmallows and water to a large, microwave-safe bowl. Microwave on high for 1 minute; the marshmallows should be soft and puffy at this point.

Stir the marshmallows with a rubber spatula until they are smooth. If 1 minute isn't enough, you can microwave the marshmallows at 30 second intervals, stirring between each interval, until the mixture is completely smoothed out. 

Optional:  For a single color of fondant, you can add food coloring in this step.  For multiple colors, see the note at the end.

Gradually add the powdered sugar, one cup at a time, and continue to stir until the sugar has been incorporated and the mixture becomes nearly impossible to stir.

Lightly dust your counter (or whatever surface you will be kneading the fondant on).  Scrape the mixture out of the bowl and onto your work surface. The mixture will be very, very sticky, and there may be some lumps of powdered sugar.  It's normal.  Spray your hands with some nonstick cooking spray and begin to knead your fondant like you would a bread or pizza dough.

Knead the fondant until it is smooth and doesn't stick to every surface of your hands and/or kitchen.  You can sprinkle more powdered sugar on it while you knead if needed, but don't overdo it.  You want a smooth, easy to work with mixture.  At this point, you can roll it out cover your cake, roll it into "snakes" of about 1/2" diameter if you want to make a brain like this, or wrap it in plastic wrap for storage.