Heat 1 1/2 inches of oil in a heavy bottom pot over medium heat to 360 degrees (Keep a close eye on the temp while you prepare the churro dough, you don't want it to become too hot, so you may have to reduce the temp or remove the pot from the burner for a moment).
In a medium saucepan combine milk,water,butter,
2 tsp sugar,and salt and bring mixture just to a boil. Once it reaches a boil,remove from heat and immediately stir in vanilla and flour. Stir mixture with a silicone spatula while running dough along bottom of saucepan to smooth any lumps and stir until mixture comes together and is smooth.
Transfer to a piping bag fitted with a large open star tip and carefully pipe about 1 to 1 1/2 inches of dough out over oil and using clean scissors, cut dough at top to allow dough to drop into oil (to make it faster I'd pipe about 2-3 inches out at time and would cut 2 at once then pipe more and repeat).
Work in fairly small batches being careful not to overcrowd (which will reduce oil temperature too much. You want the oil to remain close to 350). Allow churros to fry until golden brown (stirring occasionally near the beginning of frying will help keep them from sticking to each other).
Remove with a wire skimmer and drain on a plate or baking sheet lined with several layers of paper towels. In a small mixing bowl,whisk together 1/2 cup granulated sugar and cinnamon. Toss warm,drained churros into sugar mixture to evenly coat. For best results serve warm with chocolate sauce if desired.