1. Prepare Crust: Stir together first 3 ingredients in a large bowl. Cut 1 cup butter into flour mixture with a pastry blender until mixture resembles coarse meal. Whisk together egg yolk and milk; stir into flour mixture just until dough starts to form a ball. Shape dough into a flat disk using lightly floured hands. Wrap disk in plastic wrap, and chill 1 to 24 hours.
2. Prepare Filling: Preheat oven to 425°. Place peaches and next 3 ingredients in a large bowl. Stir together 1 3/4 cups sugar and 1/2 cup flour; sprinkle over peach mixture, and gently stir. Spoon into a lightly greased 13- x 9-inch or shallow 3-qt. baking dish. Drizzle with melted butter.
3. Place dough disk on a lightly floured surface; sprinkle with flour. Place a piece of plastic wrap over dough disk. (This makes the dough easier to roll.) Roll dough to 1/8-inch to 1/4-inch thickness; cut into 2-inch squares. Arrange squares in a patchwork pattern over peach mixture, leaving openings for steam to escape.
4. Whisk together egg and 2 Tbsp. water; brush dough with egg mixture. Sprinkle with sanding sugar or sparkling sugar.
5. Bake on lowest oven rack at 425° for 40 to 55 minutes or until crust is deep golden and peach mixture is bubbly, shielding edges with foil during last 5 to 10 minutes to prevent excessive browning. Transfer to a wire rack; cool 1 hour.