Bring a pot of water to a boil. Blanch the peeled peach slices in the boiling water for 35-40 seconds. Remove the peaches and immediately transfer them to a bowl of ice water to stop the cooking process. Drain the peaches and set aside.
In a saucepan over medium heat, melt 3 tablespoons of butter. Add half of the vanilla extract, cinnamon, and brown sugar. Stir until the sugar is dissolved and the mixture is well combined. Add the sliced peaches and cook until they are soft and the sauce is caramelized. Remove from heat and set aside.
In a shallow dish, whisk together eggs, milk, and the remaining vanilla extract. Heat a skillet over low heat and add 2 tablespoons of butter. Dip slices of challah bread into the egg mixture, coating both sides. Place the dipped bread slices on the skillet and cook until golden brown on both sides. Sprinkle cinnamon on each side of the bread while cooking.
Place the cooked French toast on a serving plate. Spoon the caramelized peach mixture over the French toast. Add a dollop of whipped cream on top. Dust with powdered sugar for extra sweetness.