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Soak the dried mushrooms until they are plump and tender. This will take over 2 hours depending on the size of the mushrooms.
Squeeze out the water from the soaked mushrooms, and then cut the mushrooms into quarters (or halves if small). Cut the peppers into small pieces.
Add the potato (or corn) starch to the mushrooms, and massage them well to coat evenly.
In a pan, add all the sauce ingredients, and stir well. Bring it to a boil. When it starts to bubble, reduce the heat to medium low, and simmer until it thickens slightly, about 4 minutes.
Add oil to a heavy bottom pan, about ½ inch high. When the oil is sufficiently hot (about 320°F), drop the mushroom pieces in one at a time. Cook until light golden brown, 1 to 2 minutes.
Remove and set them on a wire rack or a paper towel-lined plate.
Reheat the oil to 320°F. Deep fry again until golden brown, about a minute.
Heat the sauce over medium heat. Add the mushrooms and peppers, and stir well until the mushroom pieces are evenly coated.