Prep the apples. Peel, core, and dice 2 cups apples. Place in a small bowl and toss with 2 tbsp brown sugar, 1 tsp cinnamon, ½ tsp nutmeg, and 1 tbsp flour. Set aside.
Make the streusel. Whisk together 1 cup flour, ½ cup brown sugar, 1 tsp cinnamon, and pinch of salt. Add 3 oz melted butter, stirring until mixture is well hydrated and crumbly.
Preheat oven to 350° F. Butter an 8x8-inch baking dish. (If you want to be able to remove the full coffee cake easily from the pan, line the bottom with parchment and leave a few inches hanging over two sides of the pan to use as "handles".)
Make the coffee cake batter. In a large bowl, whisk together 1 ½ cups flour, ½ cup brown sugar, 1 ½ tsp baking powder, and ½ tsp salt. In a liquid measuring cup, whisk together 4 oz melted butter, ½ cup sour cream, ¼ cup milk, 2 eggs, and 1 tsp vanilla. Gently fold dry ingredients and wet ingredients together just until combined and no streaks of flour remain.
Layer. Pour about half of the coffee cake batter into the bottom of the prepared pan, spreading evenly. Top with apple cinnamon mixture, then sprinkle evenly with walnuts, if using. Dot the remaining coffee cake batter on top, then carefully spread it evenly over the apple mixture, going all the way to the edges and corners. Crumble streusel mixture on top.
Bake. Bake coffee cake until streusel is golden brown, top springs back lightly when touched, and a toothpick inserted in the center comes out with just a few moist crumbs (but not wet batter), about 45-55 minutes.
Cool and glaze. Allow the cake to cool for at least 30 minutes before glazing. Removing it from the pan will help it cool faster.Whisk together ½ cup powdered sugar, ½ tsp vanilla, ⅛ tsp cinnamon, pinch of salt, and 2 tbsp cream. If mixture is too thick to drizzle, add more cream, a little at a time, until it's pourable. Drizzle over cake in any desired pattern. Slice and serve!