In a small heavy skillet, melt 2 tablespoons butter. Add pecans; cook over medium heat until toasted, about 4 minutes. Set aside to cool.
In a large bowl, cream sugar and remaining butter until light and fluffy. Add eggs, one at a time, beating well after each addition. Beat in vanilla. Combine the flour, baking powder and salt; add to creamed mixture alternately with milk. Beat just until combined. Fold in 2 cups reserved pecans.
Spread evenly into three greased and waxed paper-lined 9-in. round baking pans. Bake at 350° for 25-30 minutes or until a toothpick inserted near the center comes out clean. Cool for 10 minutes before removing from pans to wire racks to cool completely.
For frosting, in a large bowl, beat the cream cheese, butter, confectioners' sugar and vanilla until smooth. Beat in enough milk to achieve spreading consistency. Spread frosting between layers and over top and sides of cake. Sprinkle with remaining pecans. Store in the refrigerator.