Preheat the oven to 350°F. Spray a 8x8 pan with nonstick spray.
Whisk together the milk, honey, applesauce, egg, and vanilla.
Stir together the oats, baking powder, 2 teaspoons cinnamon, and salt. Add the wet ingredients and stir gently until combined.
Stir in the apples and walnuts. Spread in the prepared pan.
Stir together the sugar and remaining 1 teaspoon cinnamon. Sprinkle on top of the oatmeal. Bake for 45 minutes. Cut into 9 squares and serve immediately with honey and milk. Store leftover oatmeal in a covered container in the refrigerator. Heat each square for 15-20 seconds in the microwave, if desired.