In a medium saucepan, blend sugar, flour, salt and cocoa powder. Add milk, water and butter. Cook over medium heat, stirring constantly until sauce begins to bubble and thicken, about 20 minutes. Remove from heat and stir in vanilla.
Don't be tempted to increase the temperature when cooking -- it will get there. Be sure to scrape the bottom of the pan so the fudge doesn't stick. Store the sauce in the refrigerator. Reheat to serve warm over ice cream, the way Granddad liked it.