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Mix together granulated sugar, cornstarch and nutmeg in a saucepan.
Gradually stir in the milk.
Heat to boiling over a medium heat, stirring constantly.
Boil and stir 1 minute, and then you can remove from heat.
Stir in the butter and lemon peel.
Spread the mixture evenly in an ungreased square baking dish, 8x8x2 inches.
Refrigerate uncovered for at least 3 hours, until firm.
Cut the custard into 2-inch squares, using a wet knife.
Dip the custard squares into eggs, then coat with bread crumbs.
Heat oil to 360°F, and fry 2 or 3 squares at a time for about 1 to 2 minutes or until light brown.
Drain on paper towels.
Sprinkle with powdered sugar.