Preheat oven to 350 degrees F (175 degrees C). Grease and flour three 8 inch round pans.
In a large bowl, mix together sugar, oil, and eggs. Add food coloring and vinegar to buttermilk. Add baking soda to flour. Add flour mixture and buttermilk mixtures alternately to the sugar mixture. Mix well. Stir 1 teaspoon vanilla into batter. Pour batter into prepared pans.
Bake for 20 to 25 minutes, or until done. Remove from oven, and cool on wire racks.
Mix together cream cheese, butter or margarine, confectioners' sugar, 1 teaspoon vanilla. Stir in nuts. Frost cooled cake.