Crush peaches until smooth. Add sugar, lemon juice and vanilla - stir to dissolve sugar. Whip instant milk and ice water in 2 quart bowl with electric mixer until soft peaks form. Fold whipped milk into peach mixture. Pour into two 1 quart ice trays. Freeze. When frozen turn into chilled bowl and beat until smooth and creamy, but not melted. Serve at once or store in freezer for future use. (This is best when served when it is first made, but keeps quite well in freezer).