Hi I have made this icing for years. When I go to cook the milk and flour I put these two ingredients into a shaker along with the vanilla and shake the heck out of it.  Then it goes into the pot until it thickens and I stir the entire time,  I mix it up very well put saran over the top and place the flour and milk mixture in the fridge until it is cold.  During this time I cream the butter and the sugar that I previously refined in the food processor.  This will make a very creamy icing and not grainy. I then put the cooled flour and milk mixture in the sugar and butter mixture a little at a time until it is beat smoothly. 

remember NOT to beat the mixtures to long and the butter will start to separate.  I just love this recipe also.  When I started it was lumpy and grainy but NOT anymore!!!!!  Enjoy

This is the icing that I grew up with on my Mom's "Red Waldorf" cake. Family favorite.

I haven't made it in a few years. Cake is in oven now and getting ready to start icing. Thought I'd check here for tips as I, too, have had trouble with lumps in past as well.

As I was reading through I suddenly remembered the once that I made it with great success yrs ago.

I followed normal directions, EXCEPT, instead of waiting for it to cool on it's own, I put it over an ice bath and stirred almost constantly as it cooled. So happy that I just remembered this. Yay me! ha!

Will try to remember to come back here after the fact to report whether or not this worked.

If this were to be used as a "regular" icing in a bakery, I'd think you'd have a bit of trouble with it's not-so-white color, but I, too, much prefer this icing over any buttercream that I've ever had!