For the cake, preheat the oven to 350° F and place a rack in the center of the oven. Butter two 9-inch round cake pans and line the bottoms with circles of parchment or waxed paper. Lightly dust the sides of the pans with flour, tapping out the excess.
For best results, use a mixer with a wire whip attachment. Combine the flours, sugar, baking soda, salt, and cocoa and beat on low speed until well mixed.
In a medium saucepan, cook 1 cup of the water with the chili powder over medium heat until simmering. Remove the pan from the heat and stir in the vanilla.
Add the softened butter to the dry mixture and beat thoroughly on medium-low speed. The mixture should be grainy. Raise the speed to medium and gradually add the remaining cup of water and the buttermilk. Add the eggs on at a time, beating well after each addition.
Slowly add the hot water/chile mixture and continue to beat just until well combined--be sure not to over-beat. Pour the mixture into the pans and bake for 35 to 40 minutes or until a toothpick inserted into the centers of the cake comes out clean.
To cool, set the pans on a wire rack for 15 minutes. Then turn the cakes out onto the rack, remove the paper from the bottom, and immediately reinvert so that the risen tops don't flatten. Let sit until completely cool before frosting.
For the frosting, combine the butter and cocoa in a large saucepan and melt over medium heat. Stir in the buttermilk. Add the confectioners' sugar a little at a time, stirring with a wired whisk between additions. Stir in the bourbon and vanilla. The frosting should stiffen as it cools. When it has reached a spreadable consistency, assemble the cake.
If necessary, trim the tops of the cakes so they are level. Place one of the cake layers onto a 9-inch round cardboard cake circle. Spread 1 cup of the chilled frosting over the cake layer. Sprinkle 1 cup of the chopped walnuts over the frosting. Place the second layer of the cake onto the frosted base. Use the remaining frosting to cover the top and sides of the cake. Finish the top of the cake by holding the spatula at a slight angle and making several strokes to smooth the top. To decorate the cake, press the remaining walnuts against the lower half of the side of the cake and on top of the cake.Makes 4 Source: