In a large bowl, dissolve yeast in warm water. Add 1/2 cup sugar, butter, milk, egg yolks, salt, lemon peel, nutmeg and 2 cups flour. Beat until smooth. Stir in enough remaining flour to form a soft dough (dough will be sticky).
Turn onto a floured surface; knead until smooth and elastic, about 6-8 minutes. Place in a greased bowl, turning once to grease the top. Cover and let rise in a warm place until doubled, about 1 hour.
Punch dough down. Turn onto a lightly floured surface. Roll into a 16-in. x 10-in. rectangle. Combine cinnamon and remaining sugar; sprinkle over dough to within 1/2 in. of edges. Roll up jelly-roll style, starting with a long side; pinch seam to seal. Place seam side down on a greased baking sheet; pinch ends together to form a ring. Cover and let rise until doubled, about 1 hour. Brush with egg.
Bake at 375° for 25-30 minutes or until golden brown. Cool completely on a wire rack. For glaze, combine the confectioners' sugar, lemon juice and enough water to achieve desired consistency. Spread over cake. Sprinkle with colored sugars. Yield- 1 cake (12 slices).
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