Remove the crust from the bread
Cut bread into 1/2-inch cubes and fry in butter and oil mixture until golden brown, transfer to paper towel to dry.
Cook scrubbed, unpeeled potatoes in large pot of boiling salted water until tender, about 45 minutes.
Drain. let cool enough to handle.
Cut potatoes into large pieces.
Refrigerate until cold, about 30 minutes.
Mash potatoes with fork or potato masher
Mix in salt and nutmeg.
Add 1/2 cup flour and cornstarch.
Using hands, knead mixture in bowl until smooth dough forms, adding more flour by tablespoonfuls if dough is sticky.
Mix in egg.
Form dough into balls, using 1/4 cupful for each.
Insert bread cube into center of each dumpling; roll dumpling between palms to enclose bread cube completely and form smooth balls.
Working in batches, cook dumplings in large pot of nearly boiling salted water 10-15 minutes (or until dumplings rise to top).
Using slotted spoon, transfer dumplings to large bowl.
Keep covered with a damp kitchen towel as remaining dumplings are cooked.
You may need to cook the dumplings in batches, you don't want them touching while cooking.