Lightly grease a 2-quart square baking dish; set aside.
In a heavy large saucepan, combine whipping cream, milk, and orange peel. Heat, stirring frequently, until mixture is steaming. Discard orange peel.
Meanwhile, in a large bowl, beat together eggs and egg yolks. Stir in granulated sugar and orange liqueur. Stir whipping cream mixture into egg mixture. Pour into prepared baking dish. Spread one side of each bread slice with butter. Arrange bread, buttered sides up, atop egg mixture in dish, pressing lightly to absorb some of the liquid.
Bake in a 325 degree F oven for 30 to 35 minutes or until puffed and a knife inserted in custard (not in bread) comes out clean. Cool on wire rack about 30 minutes. Sprinkle with powdered sugar and nutmeg. Serve warm.