In a large bowl, dissolve yeast in warm water. Let stand until foamy, about 5 minutes. Add milk, sugar, and salt to mixture, stirring until smooth. Stir in flour until a smooth dough begins to form (if dough seems too sticky, add additional flour by the tablespoon until it comes together)
Turn dough onto a floured surface and gently knead a few times until dough is cohesive and elastic. Place dough in a large greased bowl, turning once to grease top. Allow dough to rise 1 to 1-1/2 hours or until doubled.
Preheat oven to 400F. Line two baking sheets with parchment paper and set aside. Punch risen dough down and divide into 8-10 uniform pieces. Using your hands, roll dough into 16-in ropes and place on a floured surface.
Gently flatten each rope out to 1-2 in width. Sprinkle cheese evenly over 1/3 of each dough rope, facing it closest to you. Arrange pepperoni over cheese. Gently and very tightly roll filled dough ropes up along the long side back into ropes. Pinch edges to seal.
Shape dough ropes into a pretzel shape by making a loop and then twisting ends and bringing up into the loop. Pinch edges to adhere them to the pretzel loop.
Bring water to a boil in a large saucepan. Dissolve baking soda in boiling water. Working two at a time, carefully place pretzels into boiling water, boil about 15-20 seconds then flip to opposite side for an additional 15-20 seconds. Remove pretzels from water and transfer to prepared baking sheets. Repeat boiling process with remaining pretzels.
Once all pretzels are boiled, bake pretzels at 400F 10 minutes or until a deep golden brown and cheesy is gooey. Remove from oven and allow pretzels to cool a few minutes on a wire cooling rack. Enjoy warm with lots of warm marinara sauce for dipping!