In large bowl, mix 1 1/2 cups flour, yeast, sugar, anise seed, orange peel, salt and nutmeg. Heat water, milk and butter until very warm (120 to 130?F). Butter does not need to melt. Gradually add to dry ingredients and beat 2 minutes at medium speed of electric mixer, scraping bowl occasionally. Add 1 egg and 1/2 cup flour. Beat at high speed 2 minutes, scraping bowl occasionally. Stir in nuts and enough additional flour to make a soft dough.
Knead on lightly floured surface until smooth and elastic, about 8 to 10 minutes. Place in greased bowl; turn to grease top. Cover; let rise in warm, draft-free place until doubled in size, about 1 hour.
Punch dough down. Divide dough in half; roll each piece into 24-inch rope. On greased baking sheet, loosely twist ropes. Shape into circle; seal ends. Place 6 eggs between ropes in twist. Cover; let rise in warm, draft-free place until doubled in size, about 40 to 50 minutes.
Beat remaining egg with 1 tablespoon water; brush on loaf (not on eggs). Bake at 350?F for 35 minutes or until done. Remove from sheet; cool on wire rack. Brush eggs with food coloring; drizzle bread with glaze.
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