In a bowl, combine 1 1/2 cups flour, sugar, yeast and salt. Heat milk, water and butter to 120°-130°. Mix in with dry ingredients until moistened. Beat in eggs until smooth. Add cherries, raisins and nuts; mix well. Stir in enough remaining flour to form a ball dough. Kneed on a floured surface until smooth and elastic, about 6-8 minutes. Place in a greased bowl, turning once to grease top, and cover and let rise in a warm place for 1 hour.
Preheat oven to 350°. Divide into two portions, one slightly larger than the other.
Shape the larger portion into an elongated triangle with rounded corners for Santa's head and hat.
Divide rest of dough in half. Make a elongated half circle with one half of dough for the beard. Using scissors cut into strips to within 1 in. of top. Place on Santa's face; twist strips.
Use the remaining dough for the mustache, nose, pompom and brim. For the mustache flatten and cut the ends into small strips with scissors. Place above beard. Place a small ball above mustache for nose. Fold tip of hat over and add pompom. Roll out a narrow piece of dough to create a hat brim; position under hat. Keep 2 dried cherries and use as the eyes.
Separate yolk from egg white. In a bowl beat egg yolk and add red food coloring; brush over hat, nose and cheeks. Brush egg white over remaining dough.
Cover loosely with foil and bake 15 minutes. Uncover; bake 20 minutes longer or until golden brown. Cool.