1. Cut taffy into 24 1/2-inch triangles, for flags. Line 2 baking sheets with parchment or wax paper. Draw a 2-1/2 x 1-3/4-inch right triangle on paper to make sail template; place under parchment or wax paper. Place melting wafers in a resealable plastic bag; heat in microwave on medium heat until melted, about 2 minutes. Snip a corner from bag; using template, pipe sails onto lined baking sheets. Place a pretzel stick along vertical edge of each sail; attach flags. Refrigerate 5 minutes to set. Pipe designs onto sails with decorating icing.
2. Tint all but 3/4 cup of frosting blue. Stir in remaining frosting to create a marbled effect, and frost cupcakes. Roll edges in sugar. Insert a sail into each cupcake.