Combine chocolate and water, stirring until chocolate melts; set aside to cool. Cream butter; gradually add sugar, beating at medium speed of an electric mixer until light and fluffy. Add egg yolks, one at a time, beating well after each addition. Stir in white chocolate mixture and flavorings. Combine flour and soda; add to chocolate mixture alternately with buttermilk, beginning and ending with flour mixture. Mix after each addition. Beat egg whites (at room temperature) until stiff peaks form; fold into chocolate mixture. Pour into 3 greased and floured 9 inch round cake pans. Bake at 350 degrees for 25 minutes or until a wooden pick inserted in center comes out clean. Cool in pans 10 minutes, remove layers from pans, and cool completely on wire racks.
1. Melt the white chocolate in a double boiler. Stir until smooth. Let cool to room temperature.
Sift the confectioners' sugar into a medium bowl. Stir in the milk and vanilla. Add the butter and salt and beat until smooth. Stir in the cooled white chocolate. Refrigerate until firm, about 30 minutes.