Preheat oven to 350 degrees F (175 degrees C). Grease and flour three 8 inch round pans. Sift flour, baking powder and 1/2 teaspoon salt together and set aside.
Cream 1/2 cup butter and 1 1/4 cup sugar until light and fluffy. Add eggs one at a time, beating well after each. Add flour mixture alternately with milk. Add 1 teaspoon vanilla and beat until smooth.
Divide batter into three 8 inch pans. Bake at 350 degrees F (175 degrees C) for 25 to 30 minutes, or until a toothpick inserted into cake comes out clean.
Caramel Nut Frosting: In a heavy saucepan, combine 3 cups sugar, evaporated milk and a pinch of salt. Bring to a boil and stir until sugar is dissolved. Lower heat and cook until soft ball stage. Stir with spatula to keep from sticking. Remove from heat and cool 5 minutes. Add 1/2 cup butter, 1 teaspoon vanilla and nuts. Beat until spreading consistency.