Combine 2 cups flour, 1/2 cup sugar, undissolved yeast and salt in a large bowl. Heat milk and water until very warm (120° to 130°F); stir into flour mixture. Stir in peanut butter and enough remaining flour to make soft dough. Knead on floured surface until smooth and elastic, about 6 to 8 minutes. Cover; let rest 10 minutes.
Grease 2 large baking sheets. Divide dough into 8 equal portions.
To make 1 turtle from each portion: Reserve one-fourth of portion. Shape remaining dough into smooth ball for body. Place on greased baking sheet. Divide the reserved one-fourth portion of dough in half. From one half, pinch off piece and roll to small rope for tail; form remaining piece into oblong head. Attach head and tail to body; pinch to seal. Divide remaining piece into 4 equal pieces. Roll to 2-inch ropes for legs; place partially under body in appropriate places. Repeat with remaining dough to make 8 turtles. Cover; let rise in warm, draft-free place until doubled in size, about 30 to 60 minutes.
With scissors, make small snips in dough (1/8 inch deep) across body to mark shell. Make 2 small cuts at end of each leg to make webbed feet.
For Egg Wash, combine egg and 1 tablespoon water; brush over dough.
Sprinkle with peanuts and/or sugar, if desired. Insert mini chocolate chips, or raisin or peanut pieces, for eyes. Bake at 375°F for 15 to 20 minutes. Remove from sheets; let cool on wire racks.