In a bowl, cream shortening and sugar. Add egg; beat well. Combine the flour, baking soda and baking powder; add to creamed mixture alternately with buttermilk. Set aside 3/4 cup peanuts for topping. Stir remaining peanuts into batter. Spread into a greased 13-in. x 9-in. baking pan. Bake at 350° for 40-45 minutes or until a toothpick inserted near the center comes out clean. Cool on a wire rack.
Meanwhile, for the frosting, combine the flour and the milk in a saucepan until smooth. Bring to a boil over medium heat, stirring frequently. Cook and stir for 2 minutes or until thickened. Remove from the heat; cool completely. In a bowl, cream the butter and confectioners' sugar until fluffy. Add the cooled flour mixture and the vanilla; beat until fluffy, about 4 minutes. Spread over the cake; sprinkle with the reserved peanuts.