Preheat oven to 400 degrees F (200 degrees C). Spray doughnut pans with cooking spray.
In a large bowl, mix sifted cake flour, sugar, baking powder, nutmeg, and salt.
In a separate bowl, mix milk, eggs, vanilla and butter. Add wet ingredients to dry and mix together just until blended.
Fill each doughnut cup approximately 3/4 full. Bake 8 to 12 minutes in the preheated oven, until doughnuts spring back when touched. The tops will be pale, not brown. Allow to cool slightly before removing from pan.
To make glaze, blend confectioners' sugar, hot water and vanilla extract in a small bowl. If glaze is too thick, add hot water a few drops at a time until you reach the desired consistency. Dip tops doughnuts in the glaze. Add sprinkles, coconut, or other toppings as you please.