Use the milk as directed in place of the water....ignore the dry in the second step.
She was just trying to save you money by using dry milk.
Linda C

I agree, use the milk in place of the water and ignore the dry milk step. I'd definitely not replace it 1/1 with buttermilk powder, unless you want that particular flavor.

You can easily add a cup of wheat flour in place of white, I do it nearly always and in greater amounts. Bread flour is fine, if you have it, it's got a higher protein content and the gluten would help if you add the whole wheat flour.

I always try to make a loaf according to the recipe first and see how it comes out. If I like it, that's when I start playing with it, but subbing regular milk for dry milk isn't really a change, in my opinion.

Nah, no degree necessary. Bread is as simple as you want it to be and as difficult and complex as you make it. Start with basic bread and then when you're comfortable, branch out. It's all good and if you have a flop, so what? It'll make decent toast or bread crumbs and you're only out a bit of flour, yeast and milk.

Annie

Thanks a lot!
One last question. In the original recipe, the starter without milk - Levy says you can let it develop from 1 to 24 hours, the longer the more flavor.
If I were to put the milk in the starter in place of water - I wouldn't think I would want something with a cup of milk hanging round for several hours. Yes or no? I don't think I would ever let the starter do that but I can see where it would be handy to do the starter before bed, and finish up after coming home from work the next day.
Ok, 2 last questions. The starter liquid is 1 3/4 cups - so with the other 3/4 cup water - would you proof the yeast(3/4 tsp)?(I not really used yeast much and never proofed it but I saw it done on the Food Channel)

First, I don't proof yeast at all, I use so much of it that it never is outdated. I buy the big two pound package at Sam's Club, put half in the refrigerator and the other half in the freezer and it all gets used up in a few months.

As for the other question, I'd leave it set, even with milk. Grandma used to use sour milk to bake cakes, biscuits, etc. when I was a child, she'd never throw it out. You'll bake it and it'll be fine.

Annie