Cream butter, sugar, and cream cheese until light and fluffy. Add eggs, one at a time, beating thoroughly after each one.
Add dry ingredients alternately with milk and water, blending well. Fold in nuts and lemon rind.
Pour into a greased and floured 9x5x3 inch loaf pan.
Bake at 350°F about 1 hour or until golden brown.
Stir sugar with lemon juice until dissolved. Drip over hot loaf. Let stand in pan for 30 minutes.
Turn out on a cake rack.