Preheat oven to 350. Combine sour cream and milk. Beat butter at medium speed until creamy. Gradually add 2 cups sugar, beating well. Add eggs, 1 at a time, beating after each addition. Combine flour, baking powder and salt; add to butter mixture alternately with sour cream mixture, beginning and ending with flour mixture. Beat at medium-low speed until blended. Stir in 1 tsp vanilla. Pour batter into 2 greased and floured 9-inch round cake pans. Bake for 30-35 minutes or until toothpick inserted in center comes out clean. Cool in pans 10 minutes, remove from pans and cool completely. To make frosting: sprinkle 1/3 cup sugar in shallow, heavy 3 1/2 quart Dutch oven; cook over medium heat, stirring constantly, 3 minutes or until sugar is melted and syrup is light golden brown (sugar will clump). Remove from heat. Stir together 1 Tsp flour and 2 1/2 cups sugar in large saucepan; add milk and bring to boil over medium-high heat, stirring constantly. Gradually pour about 14 of hot milk mixture into caramelized sugar, stirring constantly. Gradually stir in remaining hot milk mixture until smooth. Mixture will lump but continue stirring until smooth. Cover and cook over low heat 2 minutes. Increase heat to medium; uncover and cook, without stirring, until a candy thermometer reaches 238 degrees or soft-ball stage (about 10 minutes). Add butter, stirring until blended. Remove from heat and let stand, without stirring, until temperature drops to about 110 degrees (about 1 hour). Pour into mixing bowl. Add vanilla and beat at medium speed with whisk attachment until spreading consistency (about 20 minutes). This recipe is long and involved, but if you love good, old-fashioned caramel cake, this is worth the work!
