Mix together the condensed milk, 1 cup butter and flour. Chill dough. Heat oven to 375 degrees.
Mix together 1/4 cup of soft butter, powdered sugar, flavoring and food coloring.
Roll 1/3 of dough at a time to 1/8" thickness. Use approximately 1" size cookie cutters (holly, heart and/or round shaped), working quickly before dough softens. Coat both sides of shapes with sugar & put on ungreased cookie sheet. Prick each cut-out 2 or 3 times in center with a tiny fork.
Bake 7 to 9 minutes, just until set, not brown. Cool on paper towels.
Put two wafers together with 1/8" frosting between.