In a medium bowl stir together flour, baking powder, and baking soda; set aside.
In a large saucepan combine the sugar, butter and cocoa powder. Cook over medium heat till butter melts, stirring constantly. Remove from heat.
Add eggs and vanilla. Using a wooden spoon, LIGHTLY beat just till combined (DON'T OVERBEAT).
Add the flour mixture and milk alternately to the chocolate mixture, beating after each addition. Stir in the chocolate pieces and nuts. Spread batter into a 15x10x1-inch baking pan.
Bake in a 350°F oven for 20 to 25 minutes or till a wooden toothpick inserted near center comes out clean.
Fudge frosting: In a small heavy saucepan melt unsweetened chocolate and butter over low heat, stirring occasionally. Remove from heat. Stir in sifted powdered sugar and vanilla. Stir in enough hot water (2 to 4 tbsp) to make a soft spreading consistency.
Sprinkle with crushed peppermint. Cut into bars.