1.Combine yeast, sugar and water in small bowl, whisk until yeast is dissolved. Cover bowl, stand in warm place about 20 minutes or until mixture is frothy.
2.Sift flour and salt into large bowl, add yeast mixture, oil, extra water and enough milk to mix to a soft dough. Turn dough onto floured surface, knead about 2 minutes or until smooth. Place dough in oiled bowl, turn dough to coat all over with oil. Cover, stand in warm place about 30 minutes or until dough has doubled in size.
3.Turn dough onto floured surface, knead about 5 minutes or until smooth and elastic. Shape dough into a 58cm sausage, shape sausage into a ring on greased and floured oven tray, brush ends with water; press together gently. Place extra salt in small bowl, stir in 2 teaspoons of hot water. Brush dough with salt mixture, sprinkle with a little extra flour. Place in cold oven, turn temperature to 190°C (170°C fan-forced), bake about 40 minutes. Lift pagnotta onto wire rack to cool.