Grease a 10–12 cup Bundt pan very well with butter or nonstick spray, making sure to coat all the nooks and crannies. In a small bowl, stir together 1 cup granulated sugar, ground cinnamon, and nutmeg (if using). Place the 1/2 cup melted butter for coating dough balls in another small bowl and set both near your work area.

In a large mixing bowl or the bowl of a stand mixer, whisk together the all-purpose flour, instant yeast, 1/4 cup granulated sugar, and 1 teaspoon fine sea salt.

In a separate bowl or large measuring cup, combine the warm milk, warm water, melted 4 tablespoons butter, and the egg. Whisk until smooth.

Pour the wet ingredients into the dry ingredients. Stir with a wooden spoon until a shaggy dough forms. If using a stand mixer, attach the dough hook and mix on low speed until the dough comes together.

Turn the dough out onto a lightly floured surface and knead for 6–8 minutes, until smooth, soft, and elastic. The dough should be slightly tacky but not overly sticky. If very sticky, sprinkle in 1–2 tablespoons of flour as needed. Place the dough in a greased bowl, turning once to coat the top. Cover with a clean kitchen towel or plastic wrap.

Let the dough rise in a warm, draft-free place for about 60–75 minutes, or until doubled in size. A turned-off oven with the light on works well. The dough is ready when a gentle poke slowly springs back.

Punch down the risen dough gently to release air and turn it onto a lightly floured surface. Pat or roll it into a rough 8x10-inch rectangle. Using a bench scraper or knife, cut the dough into about 40–48 small pieces, each about the size of a large grape or small walnut.

Working with a few pieces at a time, roll each piece into a ball. Dip each dough ball into the melted butter for coating, letting excess drip off, then roll in the cinnamon sugar mixture until well coated. Place coated dough balls into the prepared Bundt pan, scattering chopped nuts between layers if using.

Once all the dough balls are in the pan, cover the pan loosely with plastic wrap or a towel. Let rise for 30–40 minutes, until puffy and about 1–1 1/2 inches from the top of the pan. While the dough rises, preheat the oven to 350°F (175°C).

In a small saucepan over medium heat, melt 1/2 cup unsalted butter. Stir in the packed light brown sugar and 1/4 teaspoon fine sea salt. Cook, stirring often, for 2–3 minutes, until the sugar is mostly dissolved and the mixture looks glossy. Remove from heat and stir in the cream (or milk) and vanilla. The sauce should be thick but pourable.

Gently pour the warm caramel sauce evenly over the risen dough in the Bundt pan. Bake at 350°F (175°C) for 30–35 minutes, until the top is deep golden brown and the caramel is bubbling around the edges. If the top browns too quickly, cover loosely with foil for the last 5–10 minutes.

Remove the pan from the oven and let cool on a rack for 10 minutes. Run a thin knife or spatula around the edges if needed. Place a large serving plate over the pan and carefully invert in one quick motion. Let the pan sit upside down for a minute, then lift it off and allow the caramel to drip down the sides. Serve warm, letting guests pull apart pieces with their hands or with forks.