Preheat oven to 325°.
To prepare the cake, lightly spoon the flour into dry measuring cups, and level with a knife. Combine the flour, baking powder, and salt in a bowl, stirring well with a whisk. Beat 1 1/2 cups granulated sugar, 3/4 cup cream cheese, and 1/2 cup softened butter at medium speed of a mixer until well-blended. Add the eggs, 1 at a time, beating the mixture well after each addition. Add the flour mixture, and beat at low speed just until blended. Stir in the poppy seeds, 1 tablespoon lemon rind, and vanilla.
Spoon batter into a 9-inch tube pan coated with cooking spray. Bake at 325° for 40 minutes or until a wooden pick inserted near the center comes out clean. Cool in pan 10 minutes on a wire rack; remove cake from pan. Cool completely on wire rack.
To prepare the frosting, beat 1/4 cup cream cheese, 2 tablespoons butter, and 1 teaspoon lemon rind until mixture is light and fluffy. Gradually add the powdered sugar, beating just until blended (do not overbeat). Spread frosting over top of cake.
Note: The cake can be made using a 10-inch tube pan; bake at 325º for 30 minutes or until a wooden pick inserted near the center of cake comes out clean. You can also bake the cake in a 9 x 5-inch loaf pan; bake at 325º for 1 hour or until a wooden pick inserted near the center comes out clean.