In search of the perfect donut recipe

Or is it spelled doughnuts? Either way, I'm tired of allowing my husband to spend $7 on a box of a dozen donuts from the store. I really love the old-fashioned type donuts, the glazed ones that have the edge that looks like it's been cut. But I figured I'd start out with a basic donut recipe and go from there. I used the following recipe from Free Donut Recipes.

Cake-like Donuts:

3 Tbsp shortening
2/3 cup sugar
1 egg, beaten
2/3 cup milk
1 tsp grated nutmeg
3/4 tsp salt
3 cups flour
5 tsp baking powder

powdered sugar and/or cinnamon for topping

Cream shortening and sugar. Add the beaten egg. Stir in the milk. Add the nutmeg, salt, flour and baking powder. Make a dough stiff enough to be rolled. Roll out on floured pastry board to a thickness of about 1/4 inch. Cut out with doughnut cutter (or use a water glass and a shot glass or a large round cookie cutter and a small one). Fry in deep hot fat. Sprinkle with powdered sugar/cinnamon.

The result:
This recipe made 20 donuts and about 14 donut holes. It was cake-like but had cardboard texture. The oil must remain consistently very hot between batches and only fry a few at a time. Not a favorite of mine but the kids all enjoyed it. Maybe I shouldn't use free recipes?  I'm also thinking I should roll them out a little thicker and turn the heat down on the oil just a bit so they don't cook as fast.  And no more sprinkling! Let's just roll them in powdered sugar, shall we?