Combine all the ingredients for the centers, except for the powdered sugar, in a small saucepan over low heat. Stir often as the caramel slowly melts. When the mixture is smooth, add 3/4 cup of powdered sugar and stir. Save the remaining 1/2 cup of powdered sugar for later. Use a candy thermometer to bring the mixture to exactly 230 degrees, stirring often, then turn off the heat. When the temperature of the candy begins to drop, add the remaining 1/2 cup of powdered sugar to the pan, then use a hand mixer on high speed to combine. Keep mixing until the candy cools and thickens and can no longer be mixed. That should take 1 to 2 minutes. Let the candy cool in the pan for 10 to 15 minutes, or until it can be touched. Don't let it sit too long-- you want the candy to still be warm and pliable when you shape it. Take a teaspoon-size portion and roll it between your palms or on a countertop until it forms a roll with the width of your index finger, and measuring about 4 1/2-inches long. Repeat with the remaining center candy mixture and place the rolls on waxed paper. You should have 8 rolls. Let the center rolls sit out for 1 to 2 hours to firm up.
Combine the 20 caramels with the 1 1/2 teaspoons of water in a small saucepan over low heat. Stir often until the caramels melt completely, then turn off the heat. If you work fast this caramel will stay warm while you make the candy bars. Pour the peanuts onto a baking sheet or other flat surface. Using a basting brush and working quickly, "paint: a coating of caramel onto one side of a center roll. Quickly turn the center over, caramel side down, onto the peanuts and press gently so that the peanuts stick to the surface of the candy. Paint more caramel onto the other side of the roll and press it down onto the peanuts. The candy should have a solid layer of peanuts covering all sides. If needed, brush additional caramel onto the roll, then turn it onto the peanuts to coat the roll completely. Place the candy bar onto waxed paper, and repeat with the remaining ingredients. Place the bars into your refrigerator for 1 to 2 hours so that they firm up. Pour the milk chocolate chips into a glass or ceramic bowl and zap it in the microwave for 2 minutes on 50 percent power. Gently stir the chips, then heat for an additional 30 seconds at 50 percent power. Repeat if necessary, stirring gently after each 30 seconds. Don't over-cook the chips or the chocolate will burn and seize up on you. Drop a candy bar center into the melted milk chocolate. Cover the candy bar with chocolate using 2 forks, 1 in each hand. When the candy is covered with chocolate, balance the bar on both of the forks, one at each end of the candy bar, and tap the forks on the top edge of the bowl so that much of the chocolate drops off. Carefully place the candy bar onto waxed paper and remove the 2 forks. Repeat with the remaining ingredients, and then chill the candy bars until firm.
Recipe courtesy of Todd Wilbur