Preheat oven to 350°F (180°C). Spread bread cubes on baking sheet; bake 12 to 15 min., until golden. Set aside to cool.
Meanwhile, in large bowl, whisk together milk, egg, sugar, cinnamon and vanilla. Add toasted bread cubes and walnuts; turning to coat. Let stand 15 min., stirring half-way, until bread is completely soaked.
Divide bread mixture into 2 greased 1 1/2-cup (375-mL) ramekins, spreading bread mixture into an even surface. Pour over any egg mixture left in bowl. Bake until golden and egg mixture is set, about 30 min.
Warm caramel sauce, if using, and drizzle over warm bread pudding to serve.