Melt the butter and chocolate chips in a small pot over low heat or in the microwave in 30-second intervals, stirring between each interval. Then add the peanut butter and vanilla and stir until smooth.
Add the cereal to a large mixing bowl, then pour the chocolate peanut butter mixture over top and stir until all of the cereal is coated.
Transfer the cereal to a large resealable plastic bag and pour the powdered sugar in. Seal the bag and toss until the cereal is coated. Let cool for 10 minutes, then mix in the M&M's before serving.
Notes
Nut-Free: To make the mix without peanut butter, you can use an allergy friendly substitute like sun butter, or you can add 2 tablespoons of vegetable oil in place of the peanut butter. The oil is needed to produce the thinner consistency that the fat from the peanut butter provides.