To make the batter, crack the egg in a bowl and whisk. Add milk and combine. Add salt, nutmeg, sugar, white pepper, and garlic powder and mix well. Add flour and blend well; then add baking powder and whip until smooth. Hold large fresh mushrooms by the stem. Dip cap into batter mixture. Place in a deep fryer at 325 degrees until golden brown. Serve hot.
To make the dipping sauce, combine the chili sauce, catsup, worchestershire sauce, horseradish, salt, pepper and garlic powder. Add sour cream and blend completely. Serve chilled.