In a large bowl, combine warm water and yeast. Let stand for 5-10 minutes until foamy.
Stir in milk, sugar, salt, and melted butter. Gradually add flour and mix until a soft dough forms.
Knead the dough on a floured surface for 5-7 minutes until smooth and elastic. Place in a greased bowl, cover, and let rise in a warm place for about 1 hour, or until doubled in size.
While the dough is rising, prepare the filling. In a small bowl, mix softened butter, brown sugar, and cinnamon until well combined.
Punch down the risen dough and roll it out into a large rectangle (about 12x18 inches) on a lightly floured surface.
Spread the cinnamon-sugar mixture evenly over the dough, leaving a small border. Sprinkle the crumbled bacon over the filling.
Roll up the dough tightly, starting from the long edge. Pinch the seam to seal.
Cut the roll into 12 equal slices. Place the slices, cut-side up, in a greased 9x13 inch baking dish.
Cover the dish and let the rolls rise for another 30 minutes.
Preheat oven to 375°F (190°C). Bake for 20-25 minutes, or until golden brown.
While the rolls are baking, prepare the glaze. Whisk together powdered sugar, milk, and vanilla extract until smooth.
Drizzle the glaze over the warm cinnamon rolls before serving.
Notes
For an extra crispy bacon flavor, cook the bacon until it's very crisp before crumbling.