Adjust oven rack to the middle position and preheat oven to 325 degrees F. Line 8 x 8-inch baking pan with aluminum foil, leaving an overhang on all sides.
In a medium bowl sift together the flour and powdered sugar. Using a pastry cutter, cut in the butter until the mixture resembles fine crumbs. While still in the bowl, knead the dough until smooth, about 10 times. Pat the dough evenly into your prepared baking pan and prick with a fork 25-30 times.
Bake for 25-30 minutes, or until light brown in color. Cool for at least 30 minutes on a wire rack.
Increase oven temperature to 350 degrees F. While the oven is preheating, combine the caramels and heavy cream in a medium saucepan over medium-low heat. Stir constantly until the caramels are completely melted and smooth. Stir in the cashews.
Top the shortbread with the marshmallows and pour the caramel over the top. Bake for 8-10 minutes, or until bubbly around the edges. Cool completely. Use the foil overhang to lift the bars from the pan. Cut into 12 bars and serve.