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1. In a large bowl, beat butter with an electric mixer on medium to high speed for 30 seconds. Add 1 cup sugar, baking powder, salt, and nutmeg. Beat mixture until combined, scraping sides of bowl occasionally. Beat in eggs, cream or milk, and vanilla. Beat in as much of the flour as you can with the mixer. Stir in any remaining flour. Divide dough into thirds. Add paste food coloring to each portion of dough and knead dough gently until coloring creates a marbled appearance. Cover; chill about 3 hours or until dough is easy to handle.
2. Preheat oven to 350 degrees F. On a well-floured surface, roll a portion of the dough 1/8 inch thick. Cut out dough using a 3-inch scalloped square cutter. Using a 2-inch tree-shape cutter, cut out trees on the diagonal in center of half of the squares. Carefully place cookies and cutouts 2 inches apart on ungreased cookie sheets. If desired, sprinkle cookies and cutouts with additional sugar. Bake in preheated oven for 8 to 10 minutes until edges are firm. Transfer cookies to a wire rack and let cool. Repeat with remaining dough.
3. For filling, in a small saucepan, combine baking pieces and 1 teaspoon of the shortening. Cook and stir over medium-low heat until mixture melts. If necessary, stir in remaining shortening to make filling spreadable. Spread the filling on bottom of a whole square. Top with a cookie square with a cutout, bottom side down. Sprinkle chopped pistachios into cutouts. Repeat with remaining cookies. Drizzle small tree cutouts with remaining melted mixture and sprinkle with pistachios. Let stand until set. Makes about 2 dozen sandwich cookies and 2 dozen tree cutouts.