Soften the butter. In a mixing bowl, cream together the sugar and butter until fluffy. Add the egg, lemon zest and vanilla extract and beat until blended. In a small bowl, whisk together the remaining dry ingredients. On low speed, gradually add them to the butter mixture and mix until incorporated. Add water, a few drops at a time, only until the dough starts to come away from the sides of the bowl.
Scrape the dough onto a sheet of plastic wrap and use the wrap, not your fingers, to press the dough together to form a thick flat disc. Wrap it well and refrigerate for at least 2 hours, preferably no longer than 3.
Place two oven racks in the upper and lower thirds of the oven. Preheat oven to 350 degrees.
On a lightly floured surface, roll out the dough to a 1/8-inch thickness. Cut shapes, using your favorite Christmas cookie cutters or homemade cardboard patterns or even freehand. With a small, angled metal spatula or pancake turner, transfer the cookies to non-stick or buttered or greased cookie sheets. If you are planning to hang the cookies, make small holes with the blunted end of a wooden skewer.
Reroll the scraps, chilling them first, if necessary.
Bake for 8-12 minutes or until the cookies begin to brown around the edges. For even baking, rotate the cookie sheets from top to bottom and front to back halfway through the baking period.
Use a small, angled metal spatula or pancake turner to transfer the cookies to wire racks to cool before decorating with Royal icing, dragees, sprinkles and glittering holiday edibles.
In a large mixing bowl, place the powder, confectioner's sugar and water and beat with the whisk beater attachment at low speed until the sugar is moistened. Beat at high speed until very glossy and stiff peaks form when the beater is lifted (5-7 minutes). The tips of the peaks should curve slightly.
Keeps two weeks in an air-tight container at room temperature. Reheat lightly.
Meringue powder is available at stores that carry extensive cake decorating supplies such as Michael's or Party City.