Heat the oven to 350 degrees F and arrange a rack in middle.
Whisk together milk, cream, eggs, 1/2 cup sugar, liqueur, vanilla, and salt in a medium bowl until egg is broken up and mixture is smooth. Evenly distribute bread and walnuts in a 2 quart baking dish, pour custard mixture over bread, and allow to soak for at least 15 minutes.
Meanwhile, bring about 8 cups water to a simmer over medium-high heat.
Evenly distribute remaining 1 tablespoon sugar over bread pudding. Set the filled baking dish into a larger roasting pan and add enough of the hot water to reach halfway up the sides of the baking dish. Bake until custard is set and top is lightly browned, about 50 to 60 minutes. Remove from water bath and let sit 5 to 10 minutes before serving. Serve warm, at room temperature.
Recipe courtesy of Aida Mollenkamp