For the sauce, stir sour cream, mayonnaise, ketchup, and horseradish together in a small bowl. Taste and season with cayenne; refrigerate until needed.

Optional: Salt the diced onion to draw out moisture. Let stand for 15 minutes, rinse thoroughly, drain, and transfer to a dry bowl.

To the bowl with diced onions, add remaining salt, black pepper, cayenne, garlic powder, cornmeal, flour, and baking powder, and stir to combine. Pour in milk; stir until a very thick batter forms. Let sit for 5 to 10 minutes.

Heat vegetable oil in a skillet over medium-high heat to 350°F (180°C). Line a plate with paper towels.

Drop batter by rounded tablespoons into hot oil. Fry until nicely browned and crispy, about 3 minutes per side. Drain on the prepared plate.