Cut out two 8x16-inch parchment paper rectangles. Brush neutral flavored oil all over 8-inch square baking pan. Line baking pan with the two parchment rectangles crossing over each other. Use small binder clips to hold parchment overhang over each side of baking pan. Brush oil all over parchment paper. Set aside.
In a small heavy bottomed sauce pot, add ¼ cup water, sugar, honey, and corn syrup. Stir to combine. Set over high heat and bring to a boil. Attach candy thermometer to sauce pot. Once mixture is boiling, do not stir or agitate mixture. Cook mixture to soft ball stage, 240°F.
Pour hot liquid to the bowl of a stand mixer. Let sit undistributed for 6-8 minutes, until liquid has cool to 200-210°F.
Meanwhile, sprinkle gelatin over remaining ½ cup water. Stir together. Let gelatin bloom*, about 3-5 minutes. Microwave bloomed gelatin for 15 second intervals at half power until melted. (Takes about 30 seconds). Stir in vanilla.
Add vanilla-gelatin liquid to cooled sugar mixture. Attach bowl to stand mixer fitted with a whisk attachment.
Whip on low speed until mixture forms bubbles, about 30 seconds. Gradually increase speed to high speed. Whip mixture to medium peaks*, about 6-8 minutes. The mixture should be creamy white in color, fluffy in texture, and slightly warm to the touch. Mixture will be quite sticky and tacky.
Transfer to prepared baking pan. Spread mixture in an even layer using a mini offset spatula. Mixture will be quite sticky. Chill in the freezer uncovered for 30 minutes.
Dust sifted powdered sugar all over surface of chilled marshmallow. Remove marshmallow from the pan by unclipping binder clips and lifting from the parchment paper overhang.
Peel off the parchment paper from the sides of the marshmallow. Dust exposed marshmallow with powdered sugar. Peel off the parchment bottom. Dust with powdered sugar.
Use an oil-greased knife or oil-greased scissors to cut the marshmallow into desired size. Coat the exposed surfaces of marshmallows as you cut. Enjoy immediately, or store in an airtight container for later use.