In a mixing bowl, cream butter and 1 cup of sugar. Beat in egg, cream and extract. Combine flour, baking powder and salt; gradually add to the creamed mixture. Cover and refrigerate for 2 hours or until easy to handle.
In a small bowl, beat egg yolks and water. In another bowl, combine pistachios, lemon peel and remaining sugar.
On a lightly floured surface, roll out dough to 1/8-in. thickness. Cut with a 2-1/2-in. leaf-shaped cookie cutter dipped in flour. Place 1 in. apart on ungreased baking sheets. Brush with egg yolk mixture; sprinkle with pistachio mixture.
Bake at 350 degrees F for 6-8 minutes or until edges are set (do not brown). Remove to wire racks to cool.