Beat the milk, sugar, salt, eggs, and vanilla together in a bowl; pour into a baking dish. Sprinkle the cereal over the mixture and dot with the butter pieces. Gently set the baking dish into a larger baking dish. Pour enough hot water into the larger dish to reach at least 1 inch up the side of the dish with the custard.
Bake in the preheated oven until a toothpick inserted into the center comes out clean, about 1 hour. Sprinkle the nutmeg over the dish to serve.
