COMBINE sugar and cinnamon in a shallow bowl to prepare coating. STIR until mixed well. SET aside.
POUR vegetable oil in a large heavy bottom fry pan or deep skillet. Oil should be 2″–3″ deep. HEAT oil over medium-high heat until thermometer reads 350°F.
MAKE the batter while oil heats. ADD water and butter to a large saucepan, BRING to a low boil over medium heat. In a large bowl, ADD 2 ½ cups of flour, baking powder and salt. MIX until well blended. ADD flour mixture to water, REDUCE heat to medium-low. STIR constantly until smooth. REMOVE batter from heat. SET aside for 5 minutes to cool.
PLACE batter into a large mixing bowl, ADD the remaining 3 Tbsp. of flour and MIX with an electric mixer. ADD one egg at a time, mixing until smooth in between addition of each egg. TRANSFER half the batter to the piping bag fitted with a rounded star tip.
Carefully PIPE mixture into the preheated oil, about 6″ in length. FRY until golden brown, about 5–7 minutes per side, or until browned. TRANSFER to paper towel-lined dish to absorb excess oil, then TRANSFER to cinnamon sugar mixture and ROLL to coat. REPEAT the process with remaining dough.
In another small bowl, ADD white chocolate morsels and coconut oil. MICROWAVE for 60 seconds. MIX until smooth. DIP one end of Churros into chocolate, LAY on parchment paper and SPRINKLE with crushed peppermint candy.
Only fill the piping bag with half of the batter at a time to avoid bag from bursting from too much pressure.
Do not crowd dough strips in the oil. Once dough strips are nicely browned, remove from the pan. Cooking times may vary depending on the pan used.