Lightly grease a 2-quart square baking dish. Spread apples in prepared dish. Sprinkle with 1/2 cup of the walnuts. In a small mixing bowl stir together the 1/4 cup sugar and the 1/2 teaspoon cinnamon; sprinkle over apples.
In a medium mixing bowl stir together the flour, the 1/2 cup sugar, and the baking powder. In a small mixing bowl combine the egg, evaporated milk, and the melted butter or margarine; stir into dry mixture until smooth. Pour egg-flour mixture evenly over apples; sprinkle with remaining walnuts.
Bake in a 325 degree F oven for 50 to 55 minutes or until a wooden toothpick inserted in the center comes out clean. To serve, cut into squares. Serve warm. If desired, top each serving with whipped cream or ice cream and sprinkle with cinnamon. Makes 9 servings.