Measure the cereal into a very large mixing bowl, taking care not to crush the delicate squares. Set the bowl near your work area so the warm coating can be added right away.

Place the chocolate chips, creamy peanut butter, and unsalted butter in a microwave-safe bowl. Microwave uncovered on High for 1 minute, then stir well; continue in 15- to 30-second intervals until smooth, stirring after each interval.

Stir the vanilla extract into the smooth chocolate mixture. Mix only until the vanilla is incorporated, since overheating can make the chocolate thick or grainy.

Pour the warm chocolate-peanut-butter mixture over the cereal. Fold gently with a large spatula until the pieces are evenly coated while keeping as much cereal intact as possible.

Transfer the coated cereal to a large resealable plastic bag or a container with a lid. If your bag or container is not large enough, divide the mixture into two batches before adding the sugar.

Add the powdered sugar, seal the bag or container, and shake until the cereal is thoroughly covered. Shaking in two batches helps distribute the sugar more evenly and reduces the chance of crushed pieces.

Spread the muddy buddies over waxed paper or parchment paper in an even layer. Let them cool completely, optionally chilling them for 10 to 15 minutes, before transferring them to an airtight container.