Combine chocolate chips and peanut butter in a microwave safe bowl. Microwave on high for 60 seconds. Stir. Microwave again for another 60 seconds. Stir until smooth. Power and times may vary depending on your microwave. -OR-Melt chocolate and peanut butter in a double boiler over medium heat.
Pour melted chocolate and peanut butter on top of cereal, trying to avoid the sides of the bowl. Gently fold the chocolate into the cereal, being careful not to crush the cereal.
Let sit for 15 minutes at room temperature.
In a gallon size plastic bag (I use twist tie storage bags), add 3/4 cup of powdered sugar and half of the cereal mix. Add another 1/4 cup of powdered sugar to the top. Twist the bag (or seal it) and shake it to coat the cereal pieces in sugar. Gently break apart any clumps with your fingers from outside the bag.
Dump contents of bag into a large storage container.
Repeat the above steps for the remaining cereal mix and powdered sugar.
Store in tightly sealed container. Will stay fresh for about a week.