Mix Bisquick, 1/4 cup sugar, nutmeg, 1/4 teaspoon cinnamon, the sour cream and egg until soft dough forms. Gently smooth dough into ball on floured cloth-covered board. Knead 10 times. Roll dough 1/2-inch thick. Cut with floured 2 1/2-inch doughnut cutter. Lift doughnuts carefully with spatula and place about 2-inches apart on ungreased cookie sheet. Bake until golden brown, 8 to 10 minutes.
Mix 1/2 cup sugar and 1 teaspoon cinnamon. Immediately brush entire doughnut with melted butter; dip into sugar mixture, coating all sides. Or, if desired, spread with a confectioners' sugar and milk glaze.
