HEAT oven to 350°F.

CHOP each white chocolate square into 8 chunks; set aside. Microwave semi-sweet chocolate and butter in large microwaveable bowl on HIGH 2 min. or until butter is melted, stirring after 30 sec. Stir until chocolate is completely melted. Blend in milk and vanilla. Add flour and nuts; mix well. (Dough will be stiff.)

SHAPE 1 level tablespoonful of dough around each white chocolate chunk, enclosing white chocolate completely. Place, 1 inch apart, on ungreased baking sheets.

BAKE 6 to 8 min. or cookies are until soft and shiny; sprinkle lightly with sugar. Let stand 5 min. on baking sheet. Remove to wire rack. Cool completely. (Cookies will firm up as they cool.)