1. Preheat your oven to 350°F (175°C). Spray or generously grease a 9-inch square baking pan to prevent sticking.
2. In a large bowl, whisk together the flour, ½ cup granulated sugar, and baking powder. Cut ¼ cup of the softened butter into small pieces and add it to the dry mixture.
3. Add the lightly beaten egg, milk, the remaining ¼ cup softened butter, and grated lemon peel. Mix just until the dry ingredients are moistened. (Because the batter is exceptionally thick, you may need to finish mixing by hand).
4. Gently fold in the blueberries. Spread the thick mixture evenly into your prepared 9-inch square baking pan.
5. For the topping, combine the remaining ⅓ cup sugar, ¼ cup flour, chopped walnuts, and cinnamon in a bowl. Cut in the 3 tbsp cold butter until the mixture is crumbly. Sprinkle this streusel evenly over the batter.
6. Bake at 350°F for 40 to 45 minutes. A toothpick inserted in the center should come out clean. (If using frozen blueberries, you may need to add 2-3 extra minutes).
7. While the cake cools slightly, whisk the powdered sugar and 2 tbsp milk (or lemon juice) for the drizzle. Drizzle over the top and allow the sugar to solidify before slicing.