In top of double boiler, combine butter and peanut butter and melt. Sift together sugar and dry powdered milk; set aside. Add corn syrup, water and vanilla to the peanut butter mixture. Stir in about half the dry ingredients. Blend well, then add the remaining dry ingredients. Blend until very smooth. Stir in chopped peanuts. Turn into a buttered 8" square pan. Cut into squares.