Heat oil to between medium and medium-high heat (about 335°-340°F) for frying. Preheat oven to 250°F.
Whisk flour, sugar and baking powder in a large bowl and combine with salt, pepper, mustard, paprika, cayenne (if using), and onion and garlic powders. Stir in cornmeal.
In a separate bowl, whisk together egg, milk, hot sauce (if using) and remaining 2 tablespoons oil. Stir the wet into the dry ingredients with a wooden spoon until smooth, then stir in the chopped hot dogs.