In a small bowl, cream peanut butter and butter until light and fluffy. Beat in vanilla. Gradually beat in confectioners' sugar. Shape into 1-in. balls. Cover and refrigerate for at least 30 minutes.
In a microwave-safe bowl, melt candy coating and shortening; stir until smooth. Dip peanut butter balls into coating; allow excess to drip off. Place on waxed paper. Place M&M's, plain side up, on top. Let stand until set. Use red gel to create "bloodshot" eyes.