Combine water, sugar and yeast. Stir to dissolve yeast and let stand until bubbly, about 5 minutes.
Fit processor with steel blade. Measure flour, butter, salt and nutmeg into work bowl. Process until mixed, about 15 seconds. Add yeast mixture; process until blended, about 10 seconds.
Turn on processor and very slowly drizzle just enough eggnog through feed tube so dough forms a ball that cleans the sides of the bowl. Process until ball turns around bowl about 25 times. Turn off processor and let dough stand 1 to 2 minutes.
Turn on processor and gradually drizzle in enough remaining eggnog to make dough soft, smooth and satiny but not sticky. Process until dough turns around bowl about 15 times.
Let dough stand in work bowl 10 minutes. Turn dough onto lightly floured surface and shape into ball. Place in lightly greased bowl, turning to grease all sides. Cover loosely with plastic wrap and let stand in warm place (85°F) until doubled, about 1 hour.
Punch down dough. Let stand 10 minutes. Divide into 3 equal parts. Shape each part into strand 20 inches long. Braid strands together; tuck ends under and pinch to seal. Place on greased cookie sheet. Brush with oil and let stand in warm place until doubled, about 45 minutes.
Heat oven to 375°F Brush braid with eggnog and sprinkle with sugar or almonds. Bake until golden, 25 to 30 minutes. Remove braid from cookie sheet. Cool on wire rack.
Makes 1 loaf.