Homemade Monkey Bread with toasted hazelnuts is going to be a huge hit - with the addition of the warm spice, nutmeg, granulated sugar, and brown sugar, this monkey bread is worth the rise time!
In a small saucepan, melt butter, then add the milk and water until warmed to 110°F (43°C). Remove from heat and stir in the sugar and yeast until combined. Set aside for 5 minutes; it will foam which tells you the yeast is active!
In the meantime, combine 3 1/4 cups flour and salt in the bowl of a stand mixer with a bread hook. Slowly add in the milk mixture while stirring on the lowest setting. Increase the speed and continue mixing for 6-7 minutes, scraping the sides of the bowl as needed, until the dough is smooth and tacky. If the dough is super sticky and sticks to your finger when touched quickly, add more flour, 1 TBSP at a time, until it's tacky, but not sticky.
Coat a large bowl with a tiny bit of oil and add the dough (the little bit of oil helps prevent the dough from sticking to the bowl). Cover with a tea towel, and set in a warm place to rise. Let rise until doubled, approximately 1 to 1.5 hours. To speed up the rising process, preheat the oven to 200°F, turn it off, and then place your bowl in the warmed oven for rising (make sure the oven is off!!).
Meanwhile, combine the brown sugar, granulated sugar, cinnamon, and nutmeg. Set aside. Use the softened tablespoon of butter to grease the bundt pan well, being sure to get all the nooks and crannies.
Sprinkle 1 tablespoon of the cinnamon-sugar mixture and 2 teaspoons of the melted butter into the bottom of the bundt pan.
Once the dough has risen, punch it down and gently remove it from the bowl onto a lightly floured surface. Use your lightly floured (and clean!) hands to press the dough into an approximately 14x10 inch rectangle (does not have to be exact at all!). Cut the dough into about 56 equally sized pieces (a pizza cutter or bench scraper works well, as does a good ole fashioned knife).
Roll each piece into a ball, dip into melted butter, letting the excess drip off, and roll into sugar mixture; using a fork to transfer each piece helps prevent a big mess. Place the coated dough ball in the bundt pan, staggering them evenly around the pan. Once all balls are formed and placed in the bundt pan, drizzle 1 tablespoon of the cinnamon-sugar mixture and 1 tablespoon of the remaining melted butter over the top of the dough. Be careful to not add too much extra butter, or your caramel will separate with excess butter.
Cover the bundt pan with a tea towel, and again let rise for 1 - 1.5 hours in a warm environment (use the oven method again if desired) until it is about doubled in size.
Meanwhile, toast hazelnuts in a small skillet over medium heat for approximately 5 minutes, until fragrant. Chop into small pieces.
Once the dough is almost done with its final rise, preheat the oven to 350°F (177°C). If you were letting the dough rise in the oven, remember to remove the bundt pan at this point. Bake for 30-35 minutes until bubbly and pieces are golden brown, crispy on the top, and pull apart from each other. Let sit for 3-5 minutes (no longer) and invert onto a large plate. Top with toasted hazelnuts and serve warm.
Notes
If you don't have a stand mixer, you can use a wooden spoon to combine the wet and dry ingredients for the dough and continue to knead by hand for 10-12 minutes.You can make the dough the night before, and put it in the fridge for the first rise. Then, in the morning, take it out, let it come to room temperature enough to be able to roll out and form into balls. Continue on with the recipe for the second rise.When dipping the dough balls in butter, you can also just dip one side to avoid having to let the excess drip off, and then roll the half-dipped dough ball in your hands to coat evenly. The purpose of the butter (besides adding delicious flavor) is to help the cinnamon-sugar mixture stick better to the dough.