Stir 1-cup boiling water into each package of gelatin in separate bowls two minutes or until completely dissolved. Stir in 1/2-cup cold water into each bowl of gelatin. Pour into separate 8-inch square pans. Refrigerate three hours or until firm. Cut each pan into 1/2-inch cubes.
Layer blue gelatin cubes, 2-cups of the whipped topping and red gelatin cubes in eight dessert dishes. Dollop each with whipped topping.
Flatten mashmallows; cut into star shapes. Moisten slightly and sprinkle with colored sugar. Place on top of parfaits. Refrigerate until ready to serve.