Add the first 8 ingredients to a 1-1/2- or 2-pound bread machine according to the manufacturer's directions. Select the dough cycle. When the cycle is complete, remove dough from machine. Punch down. Cover and let rest for 10 minutes.
Meanwhile, for filling, in a small saucepan combine the cranberries, the 2 tablespoons sugar, and the 2 tablespoons water. Bring to boiling; reduce heat. Cook, stirring often, for 3 to 4 minutes or until cranberry skins pop and mixture thickens slightly. Stir together the cold water and cornstarch; stir into cranberry mixture. Cook and stir until the mixture is very thick and just begins to bubble. Remove from heat; stir in preserves. Cover surface with plastic wrap and set aside to cool.
Grease a baking sheet. On a lightly floured surface, roll the dough into an 18x10-inch rectangle. Spread the filling down the center of dough in a 3-inch-wide strip. Using a sharp knife, slit dough at 1-inch intervals along each side of filling, cutting from edge of filling to edge of dough. Fold 1 dough strip diagonally over filling and lay down; fold a dough strip from opposite side diagonally over filling, overlapping end of first dough strip. Repeat with remaining dough strips, alternating from side to side and overlapping ends of dough strips. Curve ends to form a crescent shape; carefully transfer to the prepared baking sheet. Cover; let rise in a warm place for 40 to 50 minutes or until nearly double. Bake in a 375 degree F oven for 20 to 25 minutes or until golden brown. (If necessary to prevent overbrowning, cover loosely with foil the last 5 to 10 minutes of baking.) Lightly brush bread with milk and sprinkle with sugar. Or, cool bread completely and sprinkle with powdered sugar.