Sift flour and baking powder together into a large bowl. Add suet, milk, and 1⁄2 cup water, and stir with a wooden spoon until dough holds together. Shape about a third of the dough into a ball; shape remaining dough into a larger ball; wrap both in plastic wrap and refrigerate for at least 1 hour.
Grease a 5-cup ovenproof bowl or pudding basin. On a lightly floured work surface, roll out larger ball into a 12" round, then ease into bowl, pressing to fit snugly. Place half the butter and half the sugar in the lined bowl.
Pierce unpeeled lemons all over with a skewer (incisions must go all the way through) and place on top of butter mixture. Top with remaining butter and sugar.
On a floured work surface, roll out remaining dough into a 7" round and place on top of filling. Dampen edges with water and pinch crust together with your fingers to seal. Cover loosely with a 9" piece of aluminum foil (allowing room for pudding to expand) and tie in place with kitchen string.
Place bowl in a large pot. Add enough water to come halfway up side of bowl. Cover and simmer over medium heat for 3 hours. Remove bowl from pot, cool slightly, then remove foil. Invert pudding onto a platter. To serve, spoon into bowls (lemon will be soft enough to cut through).