Warm the milk slightly, then mix in the sugar and yeast. Let it stand for 10 minutes, until frothy.
In a large bowl, sift the flour, then add the salt, vanilla extract, eggs, and melted butter.
Pour in the yeast mixture and knead the dough for 8-10 minutes, until smooth and elastic.
Cover the dough with a clean kitchen towel and let it rise in a warm place for about 1 hour, or until doubled in size.
On a lightly floured surface, roll out the dough to about 2 cm (¾ inch) thickness, then cut into long strips.
Twist the strips together or form them into knots, then cover them and let them rise for another 30 minutes.
Heat the oil in a deep saucepan to about 340°F (170°C).
Fry the bicho-bichos for 2-3 minutes per side, until golden brown. Remove them with a slotted spoon and place them on paper towels to absorb excess oil.
Sprinkle with powdered sugar while still warm, and serve.
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