In a large bowl, combine warm milk, warm water, yeast, and sugar. Let stand for 5 minutes until foamy. Add 1/4 cup melted butter, salt, and flour. Mix until a soft dough forms.
Knead the dough on a floured surface for 6-8 minutes until smooth. Place in a greased bowl, cover, and let rise for 1 hour until doubled.
In a small bowl, combine the minced garlic, parsley, and rosemary with 1/2 cup melted butter. In another bowl, mix together the mozzarella and cheddar cheeses.
Roll out the dough into a large rectangle about 1/4-inch thick. Cut into 2-inch squares.
Brush each square with the herb butter mixture and sprinkle with cheese. Stack 5-6 squares together and place stacks on their sides in a greased 9x5-inch loaf pan. Repeat until all dough is used.
Cover and let rise for 30 minutes. Preheat oven to 350°F.
Brush the top with remaining herb butter and bake for 30-35 minutes until golden brown and cheese is melted. Let cool for 10 minutes before serving warm.