Preheat oven to 350F. Microwave semi-sweet chocolate and butter in large microwaveable bowl on HIGH 2 min. or until butter is melted, stirring after 30 sec. Stir until chocolate is completely melted. Blend in milk and vanilla.
Add flour and walnuts; mix well. (Dough will be stiff.)
Shape 1 level tablespoonful of dough around each caramel half, enclosing caramel completely.
Roll in sugar.
Place, 1 inch apart, on ungreased baking sheets.
Bake 6 to 8 min. or cookies are until soft and shiny.
Let stand 5 min. on baking sheet.
Transfer to wire racks. Cool completely. (Cookies will firm up as they cool.)
