In a large bowl, cream peanut butter and butter until light and fluffy. Beat in vanilla. Gradually add confectioners' sugar until combined. Roll into 1/2 inch balls; place on waxed paper - lined baking pan. Chill until firm.
In a shallow bowl, combine cereal and walnuts; set aside. In a microwave, melt caramels and butter; stir until smooth. Dip balls in caramel; allow excess to drip off. Roll in cereal mixture; return to baking sheets.
In a microwave, melt chips; stir until smooth. Drizzle over candies. Refrigerate until set.