Heat milk in a small saucepan until just starting to bubble. Remove from heat; stir in butter, honey and salt. Set aside and let cool. Set aside 2 teaspoons sugar. Stir remaining sugar into milk mixture. Let cool to room temp.
In a large bowl, combine yeast and lukewarm water. Set aside 5 minutes for yeast to soften. Beat cooled milk mixture, egg, 4 cups flour, and nutmeg into yeast mixture.
Knead dough in a bowl, adding up to 1/2 cup more flour if necessary, until a smooth, soft dough forms. Divide dough into 8 balls 3 inches in diameter. Place balls 4 inches apart on lightly greased cookie sheets; pat into 4 inch rounds. Brush tops of rounds with water and sprinkle with reserved sugar. Set aside, lightly covered with kitchen towels, about 1 hour, or until doubled in size.
Preheat oven to 350 degrees F (180 degrees C). Bake raised rounds 30 minutes, or until golden brown. Remove from oven; leave oven on. Let cool on sheets 10-15 minutes, or until cool enough to handle.
With a serrated knife, cut each round into six 1/2-inch slices. Place slices, cut sides down, on cookie sheets and return to oven for 5 minutes. Turn slices and bake 5 to 7 minutes longer, or until golden on both sides. Turn off heat and leave in unopened oven until cool, about 45 minutes. Store in tightly covered container.