Preheat oven to 350 F. Sift flour with baking powder in a mixing bowl. Set aside. Cream butter in a medium mixing bowl, and then gradually add sugar and Jell-O, creaming well after each addition. Add egg and vanilla; beat well. Gradually add flour mixture, mixing well after each addition until smooth. Form dough into 1-inch balls and place on ungreased baking sheets. Use a glass, dipped in colored sugar or Jell-O, to press dough flat. Sprinkle with additional Jell-O or colored sugar, if desired. Bake for 9 to 11 minutes or until golden brown at edges. Store in a loosely covered containers.