Preparation

Make the dough

• In the bowl of a stand mixer fitted with the paddle attachment (or in a large bowl using a hand-held electric mixer), cream the cream cheese, butter, and sugar on medium speed until light and fluffy, 2 minutes. Add the flour and salt, and then mix just until a smooth dough forms. Divide into 4 equal disks if making crescent shapes or 4 equal squares if making pillow shapes. Wrap in plastic and chill for 1 hour or up to overnight.

Make the filling

• In the bowl of a food processor, pulse the peppers with the vinegar until finely chopped, scraping down the bowl with a silicone spatula as needed. Transfer to a small saucepan, and add the sugar and salt. Cook over medium-high heat until the mixture begins to boil. Lower the heat and simmer, stirring occasionally, until jammy and almost all of the liquid has evaporated, 15 to 20 minutes. Let cool completely, and then chill for at least 1 hour.

Fill, shape and bake the rugelach

• Position a rack in the center of the oven, and heat the oven to 375°F. Line 2 large rimmed baking sheets with silicone baking mats or parchment lightly coated with cooking spray.
• To shape crescents, remove one dough disk from the refrigerator, and place on a lightly floured work surface. Roll into a 9-inch circle. Spread one-fourth of the filling on the dough, leaving a 1/2-inch edge, and then slice into 12 wedges. Roll each wedge into a crescent shape from the outside edge in.
• Alternatively, to make pillow shapes, remove one dough square from the refrigerator, and place on a lightly floured work surface. Roll the dough into an 8-inch square. Spread one-fourth of the filling on the dough, leaving a 1/2-inch edge at the top and bottom. Slice the square in half. Starting at a long end, roll each half into a cylinder from the outside in, and then cut each rolled half into six evenly sized pieces.
• In a small bowl, whisk the egg and milk. Arrange 12 rugelach on one of the prepared baking sheets. Brush with the egg wash, dust lightly with paprika, if you like, and bake until golden-brown, 16 to 21 minutes. Cool slightly before serving. Repeat with the remaining dough and filling.