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Warm 1/2 cup water and the milk in a saucepan over low heat until a thermometer registers 100 degrees F to 110 degrees F. Remove from the heat and sprinkle the yeast on top, then sprinkle with a pinch of the sugar; set aside, undisturbed, until foamy, about 5 minutes.
Whisk the melted butter, egg yolk and vanilla into the yeast mixture until combined. In a large bowl, whisk the flour, the remaining sugar, the salt and nutmeg. Make a well in the center, then add the yeast mixture and stir with a wooden spoon to make a thick and slightly sticky dough. Turn out onto a floured surface and knead until soft and elastic, about 6 minutes. Shape into a ball.
Brush a large bowl with butter. Add the dough, turning to coat lightly with the butter. Cover with plastic wrap and let rise at room temperature until the dough is doubled in size, about 1 hour, 15 minutes.
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