Using a countertop mixer fitted with the dough hook, add the bread flour, yeast, sugar, 2 Tbsp of the Parmesan cheese, salt, softened butter, and cayenne pepper (optional). Stir until well combined. Add the warm milk and diced pepperoni, and mix on low speed for 3 minutes. Increase speed to medium and continue mixing for 3-4 more minutes.

Transfer the dough into a large, lightly oiled bowl and cover with plastic wrap. Place bowl in a warm (80-85°F) location and allow dough to rise until it has doubled in size, about 1 hour.

Turn dough out onto a lightly oiled countertop and gently fold the dough 4-5 times, rotating 90° after each fold. Allow the dough to rest (covered) for 10 minutes.

Shape dough into an 8" x 6" rectangle. With the small side of the rectangle closest to you, fold the bottom 1/3 of the dough up and then fold the top 1/3 of the dough down on top of that (just like folding a letter). Finally, fold the dough in half lengthwise and pinch the seam at the bottom closed. Place the dough into a 7" x 5" loaf pan and gently press the remaining 1 Tbsp Parmesan cheese into the top of the bread. Cover the pan lightly with plastic wrap and let rise in a warm location until almost doubled in size (about 45 minutes).

Bake loaf at 375°F for 30-35 minutes, or until the top of the loaf turns golden brown in color. (Note: Tent the top of the loaf with aluminum foil after 20 minutes to prevent the Parmesan on top from burning.)