In a large bowl, cream butter and sugar until light and fluffy. Beat in vanilla. Gradually add flour. Stir in nuts if desired. Knead dough until smooth. If dough is too soft to shape, refrigerate for 15 minutes.
In small bowl, beat the cream cheese, sugar, milk, candy and food coloring if desired. Roll tablespoonfuls of dough into balls. Using the end of a wooden spoon handle, make a deep indentation in the center of each.
Fill with 1/4 teaspoon filling. Cover with 1/4 teaspoonfuls of dough; seal and gently reshape into balls. Combine topping ingredients; roll balls in topping.
Place 1 in. apart on ungreased baking sheets. Bake at 350° for 10-12 minutes or until firm. Roll warm cookies in remaining topping; cool on wire racks.