Combine the yeast and sugar with lukewarm milk and allow to rise. Mix the flour, sugar, salt, and egg with the yeast mixture in a bowl and work the dough until thoroughly blended. Cover and allow to stand in a warm place to rise. After rising about another 1/2 of its size, place on a floured board and roll out to about 1/2 inch thick. Cut with a round cookie cutter and place in a greased baking dish after dipping each in melted shortening. Sprinkle sugared walnuts on top and layer again with cut-out dough. Fill dish to 3/4 and place aside to rise. When dough has risen to fill the dish, place in oven and bake at 350 degrees until golden brown. When done, turn out and sprinkle with powdered sugar.