1Combine first five ingredients; set aside. In a separate large bowl, beat butter and both sugars together. Add eggs one at a time, mixing after each addition. Add milk and vanilla; beat until smooth. Beat in peanut butter and honey. Gradually add dry ingredients and stir until well blended. Chill dough for at least 1 hour.
2Preheat oven to 350 degrees. Combine ½ cup granulated sugar and ¼ tsp. nutmeg in a small bowl. Shape dough into 1-inch balls, roll tops in sugar mixture, and arrange on a cookie sheet about 2 inches apart. Flatten balls with a fork, making criss-cross patterns; Bake for 7 minutes or until set and starting to turn golden around the edges (do not over-bake). Refrigerate unused dough between batches to keep chilled.