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Roll out cookie dough 1/8 in. thick and use rainbow cutter from set to cut cookie. Bake and cool.
Use tip 3 and full-strength white to outline clouds. Flow in with thinned white icing.
Use tip 3 and full-strength red icing to outline top of rainbow and full-strength violet icing to outline the bottom of rainbow. Let set.
Place thinned icing in cut disposable bags. Use tip 3 to pipe lines beginning at top with red, orange, yellow, green, blue and violet; let dry.
Use tip 3 and full-strength white icing to pipe fluffy cloud details. Sprinkle with sparkling sugar.