Preheat oven to 350 degrees F (175 degrees C). Grease and flour a 9 inch tube pan.
In a large bowl, cream together the 1 cup of sugar and butter. Beat in the eggs, one at a time. Combine the flour, baking powder, baking soda, and salt, stir into the creamed mixture. Finally, stir in the water, vanilla and sour cream. In a small bowl, combine the walnuts, remaining sugar and cinnamon. Pour half of the cake batter into the prepared pan. Sprinkle half of the nut mixture over it, then top with the remaining batter, and sprinkle with remaining nut mixture.
Bake for 50 to 60 minutes in the preheated oven. Cool in pan for 10 minutes, then invert onto a wire rack to cool completely.