In a saucepan, combine 1/2 cup sugar and 1/4 cup water. When golden brown, carefully add 1/3 cup water to thin down. For custard: Preheat oven to 325 degrees.
Pour into 8 6-ounce ramekins to coat the bottom of the dishes evenly. Place the ramekins in a baking pan large enough to hold them without touching. Bring the milk to a boil in a medium saucepan. Pour in a mixing bowl. Add the chocolate and vanilla, and stir to melt.
In a large bowl, whisk the eggs and yolks with 1/2 cup sugar. Gradually whisk in the milk chocolate. Put through a strainer, then pour in the ramekins. Pour enough hot water into the pan to reach about half way up the sides of the ramekins. Bake for 30 to 35 minutes or until custards are just set in center. Transfer the ramekins to a rack to cool. Cover and refrigerate 3 hours or more.
To serve, run a knife around each custard, dip in hot water for about 2 minutes. Invert custards onto plates. Scrape bottom of ramekin molds and spoon caramel over the custard.