PREHEAT oven to 400° F. Grease or paper-line 12 muffin cups.
COMBINE flour, sugar, baking powder, salt, cinnamon and nutmeg in medium bowl. Mix apple, water, dry milk, oil and egg in small bowl. Add to flour mixture; stir until moistened. Stir in cereal. Spoon into prepared muffin cups, filling 2/3 full.
BAKE for 12 to 15 minutes or until wooden pick inserted in center comes out clean. Remove to wire rack; cool slightly. Serve warm.