In a large bowl, combine 2 cups flour, sugar, yeast, and salt. Add milk and butter and stir well to mix.
Turn dough out onto a flour-covered surface and knead 5-7 minutes, adding more flour as needed to prevent sticking. The dough should feel slightly tacky, but should not stick to the countertop. Place in a greased bowl, cover, and let rise in a warm place for 1 hour, or until doubled.
Preheat oven to 450°F and lightly coat two baking sheets with nonstick spray.
Once dough has risen, punch down and turn out onto a clean surface. Divide dough into 8 evenly sized portions, then roll each portion into a rope about 12 inches long. Cut each rope into 6 pieces.
To shape, flatten each dough piece into a 3-inch circle. Place a piece of cream cheese in the center, then bring up edges to meet in the middle and pinch to seal. Shape into a ball and set aside, repeating until all dough is filled.
Pour 3 cups water and baking soda into a small saucepan and bring to a light boil. Lower balls into the water, in batches, and boil for about 10 seconds. Remove and let dry slightly on paper towels, then arrange on prepared baking sheets. Repeat until all are boiled.
Combine egg with 1 tablespoon water and brush over the pretzel balls. Sprinkle on everything bagel seasoning.
Bake for 8-10 minutes, until golden brown. Rotate pans halfway through baking time for even browning, if needed. Cool slightly and serve.
Makes 48 bites.
If using active dry yeast, combine warmed milk and sugar, then sprinkle yeast over the top and let stand 5 minutes before mixing in the remaining dough ingredients.