Add 1/2 teaspoon ground nutmeg with the sugar. In small bowl, mix 1 cup powdered sugar, 1/2 teaspoon vanilla and enough milk for desired dipping consistency; stir until smooth. Gently dip top edges of rosettes (not rounded bottoms) into icing. Sprinkle with nutmeg. Let dry. Store in tightly covered container, making sure sides do not touch.
If the rosettes have blisters, the eggs have been beaten too much. They may not look as perfect as you like but they will still taste great.