In a small heavy saucepan, melt butter over medium heat. Add bay leaves; heat until golden brown, 5-7 minutes, stirring constantly. Remove from heat. Transfer to a large bowl; discard bay leaves. Cool completely until butter is solid.
Add 1 cup confectioners' sugar to butter; cream until light and fluffy, 5-7 minutes. Beat in egg yolks and 1 teaspoon vanilla. Gradually beat flour into creamed mixture; stir in 1/2 cup pistachios. Cover and refrigerate until firm enough to roll, about 1 hour.
Preheat oven to 350°. On a lightly floured surface, roll dough to 1/4-in. thickness. Cut into 1-1/2-in. diamonds. Place 2 in. apart on parchment-lined baking sheets. Bake until edges just begin to brown, 12-15 minutes. Remove from pans to wire racks to cool completely.
For glaze, mix water, remaining 2 cups confectioners' sugar and 1 teaspoon vanilla; stir until smooth. Dip cookies in glaze, allowing excess to drip off. Place on waxed paper; sprinkle with sea salt and remaining pistachios. Let stand until set. Store in an airtight container.