Preheat the oven to 350 degrees and place a rack in the center of the oven. Butter two 9-inch round cake pans; lightly dust the sides of the pans with flour, tap out the excess, and line the bottom with circles of parchment paper.
Cook the chile powder in 1 cup of the water in a medium saucepan over medium heat until simmering. Remove the pan from the heat, stir in the vanilla, and set aside.
Using an electric stand mixer with a wire whip attachment for best results, combine the flour, cake flour, sugar, baking soda, salt, and cocoa and beat on low speed until well mixed. Add the softened butter to the dry mixture and beat thoroughly on medium-low speed. The mixture should have a uniform grainy texture.
Increase the speed to medium and gradually add the remaining 1 cup of water and the buttermilk. Add the eggs, one at a time, beating well after each addition. Slowly add the hot water-and-chile mixture to the batter and continue to beat just until well combined; be sure not to over-beat. Pour the mixture equally into the pans and bake until a toothpick inserted in the center of each layer comes out clean, about 35 to 40 minutes.
To cool, set the pans on a wire rack for 15 minutes, and then turn the cakes out onto the rack. Remove the parchment paper and immediately invert the cakes so that the risen tops don’t flatten. Let the layers cool completely before frosting.
For the frosting, combine the butter and cocoa in a large saucepan and melt over medium heat. Remove from the heat and stir in the buttermilk. Add the powdered sugar, a little at a time, stirring with a wire whisk between additions. Stir in the bourbon and vanilla and continue to whisk until the frosting is smooth and glossy. The frosting will stiffen as it cools, but in warm weather you may need to refrigerate it. Cool to a spreadable consistency.
To assemble, if necessary, trim the tops of the cakes so that they are level. Place one of the cake layers on a 9-inch round cardboard cake circle. Spread 1 cup of the frosting over the layer. Sprinkle 1 cup of the chopped walnuts evenly over the frosting. Place the second layer of cake on the frosted base. Use the remaining frosting to cover the top and sides of the cake. Press the remaining walnuts into the frosting, covering the sides and top of the cake.