Step 1Soak the seeded, chopped chile in the vinegar for a few minutes to soften, then grind to a paste (a mortar and pestle work well for this). Grind the ginger and garlic as well to a paste, adding a little water if needed to soften. Finally, use a blender to purée the finely chopped tomatoes and coconut together with 1 cup of the water.
Step 2In a large, heavy-bottomed sauté pan, heat 3 tablespoons of the oil over high heat until hot. Add the bay leaves, peppercorns, cinnamon stick, cloves, cumin seeds and cardamom, and toast for a minute or so, just until aromatic, being careful not to burn the spices. Stir in the onions, then the ginger and garlic paste, the Kashmiri chile, coriander powder and turmeric. Reduce the heat to medium and cook, stirring frequently, until the onions are golden brown, about 20 minutes. If the gravy begins to thicken too much and dry out, and/or the onions begin to stick, stir in water, a little at a time, and continue cooking.
Step 3Remove the pan from the heat and spoon the spiced onion mixture into a bowl. Place the pan back over high heat and add the remaining tablespoon of oil. Add the lamb pieces and sear on all sides until well-browned, 8 to 10 minutes. Remove the pan from heat and place the lamb pieces on a plate. Add the spiced onion mixture back to the pan and heat over medium heat, scraping any lamb flavoring from the base of the pan.
Step 4At this point, taste the mixture, adding salt to taste. Remove the whole spices if desired (the gravy can also be puréed at this point for a smoother consistency). Stir the lamb into the gravy along with the cumin powder and habanero paste. Cook over medium-low heat, stirring frequently, to marry the flavors, 2 to 3 minutes, then stir in the puréed tomatoes and coconut. Add the remaining cup of water.
Step 5Continue cooking until the lamb is fully cooked, an additional 10 to 15 minutes. When the lamb is almost ready, stir in the potatoes and quartered tomatoes, along with one-half of the chopped cilantro. Taste again, seasoning as desired before serving. Serve the vindaloo garnished with the remaining chopped cilantro.