Combine water, key lime juice, water, vanilla, food coloring, if desired sugar and whipped topping in a blender container; blend until smooth.
Pour into 8 popsicle molds or fill ten to twelve (3 ounce cups) 3/4 full; cover and freeze for 2 hours. Sprinkle top of mixture with graham cracker crumbs and insert popsicle sticks.
Freeze for 4 hours or overnight.
Carefully remove popsicles from molds or cups to serve. Serve immediately.
