Microwave chocolate morsels in a 2-quart glass bowl at MEDIUM (50% power) 2 minutes or until melted. Stir in condensed milk, 1 tablespoon vanilla, and walnuts. Spread mixture into a buttered 9-inch square pan. Cool completely. Cut fudge into 1/2-inch squares.
Beat butter at medium speed with an electric mixer until creamy; gradually add sugar, beating well. Add egg and remaining 1 tablespoon vanilla; beat well.
Combine salt, flour, and cocoa; gradually add to butter mixture, beating well.
Divide dough into 3 equal portions. Work with 1 portion at a time; keep remaining dough chilled.
Divide each portion into 12 pieces. Quickly press each piece of dough around a square of fudge; roll dough into a 1-inch ball. Place on ungreased baking sheets. Repeat process with remaining dough and fudge pieces. Reserve remaining fudge for another use.
Bake at 350° for 11 minutes. Cool completely on a wire rack.
Tip: Be sure to keep dough you're not working with refrigerated. Chilling dough prevents it from becoming too soft to handle.