Dry milk in bread: purpose, and substitutions I've been looking for a good 100% whole grain bread recipe that I like, and came across one that looks promising in the book Home Grown Whole Grains (pp. 152):


  
  1 package active dry yeast
  1 tablespoon sugar
  ¼ cup warm water
  2 cups warm water
  3 tablespoons oil
  6 tablespoons honey
  1 teaspoon salt
  5 cups whole wheat flour
  ½ cup dry milk powder
  
  
  Dissolve the yeast and sugar in the ¼ cup water and allow to stand until the mixture begins to bubble. Add the 2 cups warm water, oil, honey, and salt and then begin beating in the flour. When you have about half of it worked in, beat in the dry milk, a little at a time, taking care to break up any lumps. Then beat in the rest of the flour....


What is the purpose of the dry milk?  And what guidelines can I follow to replace the powdered milk with something more "self sufficient"?  Perhaps normal milk, and a little less water?
Milk is added to bread for flavour, a tender crumb and well-coloured crust. 

Dry milk is used because it easy to store and easy to use in bulk. Milk also contains an enzyme called glutathione which can weaken gluten and result in a poorer quality loaf - the drying process destroys this enzyme.

You can substitute regular milk in various proportions, but you may as well simply replace the 2 cups of water with it, which will give you a nice soft loaf. Opinion is divided whether you should scald the milk (by heating to 180°F/82°C according to How Baking Works, page 150) to destroy the glutathione, but in any case it's probably a good idea to warm it anyway, to help the rise.