For the Churros: In a saucepan, combine first 4 ingredients (water,oil,rind,salt) and bring to a boil.
Skim out the rind, add flour and beat mixture with a wooden spoon on low flame until the batter becomes smooth and then congeals into a ball.
Remove from flame and put batter in a pastry bag and pipe long strips or rings of it into deep, hot oil.
Fry in deep oil until golden brown, remove and drain.
Cut into short strips and dust with sugar.
For the chocolate: combine the chocolate, sugar and milk in a medium saucepan over medium heat. Cook, stirring, for 5 minutes or until chocolate melts and the mixture is smooth. If you like your chocolate thicker, lessen the milk a bit.
Pour in a cup. Dunk the churros in it and eat! Enjoy!