In milk crumbs it acts as a drying and flavoring agent. THere is not enough liquid in many of the recipes for the powder to dissolve. You can make a similar crumb by using cornstarch and cake flour for the milk or playing with the ration of sugar, brown sugar and flour to fat. In Tosi's book "momofoku milk bar" there is a recipe for milk crumbs that uses an equal part flour and dry milk as the base but after playing with it a bit I actually liked the "vanilla crumb" we made by taking the cocoa out of her chocolate crumb and substituting cake flour.
In baking where the liquid ratios in a recipe are much higher ( bread and cake) the milk powder dissolves into the liquid. It has a duel purpose of making the finished product have a softer crumb as well as helping with browning. You can substitute soy milk for the liquid and leave out the powdered milk in a loaf of bread for a milk allergy or use water and leave the milk powder out altogether but the product will be very pale and pasty looking when it is cooked. I have had some sucess making cakes where I figure that whole milk has 4% fat content so I sub water that is mixed with 4% melted stick margarine. For example: if the recipe calls for 32 oz whole milk I sub in 1.25 oz melted margarine and 30.75 oz water. It is worth mentioning again that the cake was super pale when it was baked.
I have never tried soy milk powder so I can't offer any opinions one way or the other on using it.