In a large mixing bowl, cream butter, shortening, sugars, and lemon peel until fluffy. Add eggs one at a time, beating well after each addition. Beat in vanilla. Combine the flour, cinnamon, baking soda, allspice, nutmeg, and salt; add to creamed mixture alternately with apple sauce. Stir in the walnuts and apple.
Pour into a greased 9- or 10-inch fluted tube bundt pan. Bake at 350°F for 55-60 minutes or until a toothpick inserted near center comes out clean. Cool for 10 minutes; remove from pan to a wire rack to cool completely.
For glaze, in a heavy saucepan, melt butter and brown sugar over low heat. Stir in cream. Cook and stir until mixture comes to a boil; boil for 1 minute. Remove from heat; whisk in sugar and vanilla until smooth. Pour over cake; immediately sprinkle with walnuts.