Dissolve yeast in warm water and set aside. Put spices, orange peel,bay leaf, and ouzo in a pot with the 1/2 cup water and bring to a boil. Set aside to steep and cool. Heat milk and remove from heat. Add the butter and allow the milk to cool slightly. Put the flour, sugar, and salt in a large bowl. Mix in eggs, yeast, milk mixture, and flavored water (remove only the bay leaf) Stir the mixture until all the flour has been absorbed.
Turn the dough out onto a lightly floured board and knead until smooth, about 20 minutes. Place in a buttered bowl, and flip the dough so the top is greased as well. Cover with a towel dampened with hot water. Set in a warm, draft free place to rise until doubled in bulk, about 4-6 hours.
Punch down the dough and knead for about 5 minutes. Shape into one large round loaf and decorate the top with walnut halves. Set aside to rise once more, about 2 hours (uncovered). Bake in a preheated 350 F oven for 1 hour.