Heat the oven to 350 degrees. Line 18 regular size muffin cups with paper liners or spray with cooking spray. In a large bowl, beat 1/2 cup of the butter and 1 1/4 cups of the sugar with electric mixer on medium speed until creamy. Add the lime peel and eggs. Beat the batter until smooth and creamy, scraping the sides of the bowl if necessary. Add the flour, baking powder, baking soda and salt. Beat on low speed until moistened. Add 3/4 cup of the sour cream, 1/4 cup of the lime juice and 1/4 cup of the milk. Beat on low speed until mixed. Beat on medium speed until smooth and creamy. Spoon the batter evenly in the muffin cups, filling about 3/4 full. Bake for 20 to 24 minutes or until a toothpick inserted in the center comes out clean. Cool in the pans for 10 minutes. Remove the cupcakes from the pans to a cooling rack. Meanwhile, in a small saucepan, heat remaining 1/4 cup granulated sugar and 2 tablespoons lime juice over medium heat until the sugar is dissolved. Spoon the glaze over the warm cupcakes. Cool completely (about 30 minutes). In a large bowl, beat the remaining 1/4 cup butter, 1/4 cup sour cream, 1 tablespoon milk, powdered sugar, and vanilla extract with electric mixer on low speed until moistened. Beat on medium speed until smooth and creamy. Frost the cooled cupcakes. *Tip, if Key limes are not available, larger limes can be substituted.