Mix the first five ingredients and the lemon peel; cut in the butter until mixture is crumbly. Combine the egg, lemon juice and water to add to the flour mixture. Knead lightly into a ball; divide into 8 parts. Roll out each part on a floured board until it is 1/4 inch thick, and then cut into 4 inch square. Spoon about 1 tsp. Poppy Seed Filling into the center of each square. Bring two ends together to form a cylinder. Pinch together to seal. Place on a greased baking sheet and brush with milk. Bake at 350 F for 15-20 minutes. For Filling: Combine all ingredients in a saucepan; cook over low heat until thick, stirring often. Cool and it's ready to use.