Dry milk in bread: purpose, and substitutions
Milk is added to bread for flavour, a tender crumb and well-coloured crust. 

Dry milk is used because it easy to store and easy to use in bulk. Milk also contains an enzyme called glutathione which can weaken gluten and result in a poorer quality loaf - the drying process destroys this enzyme.

You can substitute regular milk in various proportions, but you may as well simply replace the 2 cups of water with it, which will give you a nice soft loaf. Opinion is divided whether you should scald the milk (by heating to 180°F/82°C according to How Baking Works, page 150) to destroy the glutathione, but in any case it's probably a good idea to warm it anyway, to help the rise.