In a medium saucepan, bring 3 1/2 cups water and butter to a boil; season with a pinch of salt. In a separate medium saucepan, heat the milk, 1 1/2 cups sugar, vanilla bean and seeds, cinnamon sticks over medium-low heat. When the water comes to a boil, add the rice. Cook, stirring occasionally, until most of the water has absorbed into the rice, about 15 minutes. Strain the milk mixture into the rice; cook, stirring often, until the rice is tender, 10 to 15 minutes. Spread the cooked rice on a large rimmed baking sheet to cool; refrigerate at least 2 hours and up to overnight.
Place the hazelnut spread in a pastry bag. On a wax paper-lined plate, pipe the spread into 12 (1-inch) morsels. Transfer plate to freezer; freeze until hazelnut spread is solid, about 1 hour.
Using a 1/2-cup measure, form the cool rice into balls; insert a portion of the frozen hazelnut spread into each ball. Repeat with remaining rice and hazelnut spread.
In a large bowl, whisk together 1/2 cup flour and 1/2 cup water until smooth (should be the consistency of buttermilk). Place the breadcrumbs in a shallow dish. Dip each rice ball into the batter, shaking off the excess; roll in the breadcrumbs. Repeat with the remaining rice balls.
In a Dutch oven or other large pot, heat the oil to 350 degrees F. Use a slotted spoon to lower the rice balls into the hot oil in batches of 2 to 4 arancini (being careful not to crowd the pan). Fry the arancini, turning occasionally, until golden, 3 to 5 minutes. Place arancini on a paper towel-lined plate to drain. In a small bowl, stir together the remaining 1/4 cup sugar with 1 teaspoon ground cinnamon. Roll warm arancini in cinnamon sugar.
This recipe was provided by professional chefs and has been scaled down from a bulk recipe provided by a restaurant. The Food Network Kitchens chefs have not tested this recipe, in the proportions indicated, and therefore, we cannot make any representation as to the results.