Combine 1/4 cup warm water, 1 teaspoon granulated sugar and the yeast; let stand for 5 minutes.
Using an electric mixer, beat the butter with the salt and the remaining 2 tablespoons granulated sugar until fluffy. Beat in 1 1/4 cups milk, the egg and the yeast mixture. Gradually add the flour at low speed. Transfer the dough to a floured surface and knead for 2 minutes. Place in a greased bowl and turn to coat. Cover and refrigerate overnight to let rise.
Using an electric mixer, beat the confectioners' sugar, cream cheese and remaining 2 tablespoons milk.
Preheat the oven to 400 degrees . Grease a 9-by-13-inch baking pan. On a floured surface, roll out the dough into a 12-by-16-inch rectangle. Spread the blueberry preserves on the dough, leaving a 2-inch border. Roll up lengthwise and seal the edges. Slice into 12 pieces and place in the pan cut sides up. Bake until golden-brown, 20 to 25 minutes. Top with the cream cheese icing.