1. Combine water, yeast and 1/2 teaspoon of the sugar in cup, stirring to dissolve yeast. Let stand 5 minutes or until bubbly.
2. Combine 1-1/2 cups of the flour, 1/2 cup of the sugar and the salt in large mixer bowl. With mixer at medium speed, gradually add yeast mixture, 1/2 cup of the milk, the melted butter, 1 of the eggs and the vanilla. Beat 2 minutes.
3. With spoon, stir in 1-3/4 cups of the flour to make a soft dough. Turn dough onto lightly floured surface; knead until smooth and elastic, 8 to 10 minutes, adding remaining 1/4 cup flour as needed. Shape dough into a ball.
4. Place dough in large greased bowl, turning to grease top. Cover bowl and let rise in warm, draft-free place, about 1-1/2 hours.
5. Grease a large cookie sheet. Place dough in center and sprinkle top lightly with flour. With lightly floured rolling pin, roll dough into 15x10-inch rectangle. Spread cherry preserves down center third of dough, lengthwise, leaving 1 inch border at top and bottom. Reserve 1 tablespoon of the almonds for topping; sprinkle remaining almonds over preserves.
6. With knife, make diagonal cuts, 1 inch apart, lengthwise along both sides of dough, almost to preserves. Fold dough strips over preserves, alternating strips; pinch ends under to secure.
7. Beat remaining egg and the water in cup; brush over dough. Sprinkle with remaining 1-1/2 teaspoons sugar and reserved almonds. Let rise in warm, draft free place, 30 minutes.
8. Heat oven to 350 degrees F. Bake Danish 20 to 25 minutes or until golden. Cool on wire rack.
9. Stir confectioners sugar, remaining 2 teaspoons milk and almond extract in cup until smooth. Drizzle over top of cooled Danish. Slice into 16 pieces. Makes 16 servings.