Sift flour, baking powder and salt onto waxed paper;stir in chopped walnuts. Lightly grease an 8x8x 2.75 or springform pan. Beat eggs in a medium size bowl with electric mixer at high speed until frothy. Beat in sugar gradually and continue beating at high speed until mixture is very thick and creamy, at least 5 minutes. Stir water and vanilla into egg mixture. Gently fold in flour mixture. Pour batter into prepared pan. Bake at 180ºC for 35 minutes or until center springs back when lightly touched with fingertip. Cool in pan on wire rack 5 minutes. Loosen cake around sides; release and remove ring; loosen from bottom; remove from pan. Cool completely. Cut cake into 3 thin layers. Drain peaches; reserve syrup. combine 3 tablespoons. of the syrup with the sherry in a small bowl. Reserve 8 peach slices; chop remainder and add to sherry mixture. Beat cream in a medium size bowl until stiff. Put bottom cake layer on serving plate. Spoon half the sherry-peach mixture over layer; spread with 1 cup of the cream. Repeat with second layer; top with remaining layer. Spread a layer of whipped cream over top layer. Put remaining cream in a pastry bag fitted with a star top. Pip out swirls on top, then garnish with reserved peach slices and walnuts. Chill until ready to serve.