Prepare the Strawberry Filling: Combine diced strawberries and ¼ cup sugar in a saucepan. Let sit for 10 minutes. Cook over medium heat until bubbly. Mix cornstarch with water to create a slurry and stir into the berries. Cook for 1-2 more minutes until thickened. Remove from heat, pour into a bowl, and let cool completely.

Bake the Cake Layers: Preheat oven to 350°F (175°C). Grease, flour, and line two 9-inch round cake pans with parchment paper. Whisk together flour, baking powder, and salt in a medium bowl. In a large bowl, beat softened butter and granulated sugar for 3-4 minutes until light and fluffy. Beat in eggs one at a time, then mix in vanilla.

Combine Wet and Dry: With mixer on low, alternately add the dry ingredients and milk to the butter mixture, beginning and ending with the dry ingredients. Mix just until smooth.

Bake: Divide batter evenly between prepared pans. Smooth tops. Bake for 25-30 minutes, or until a toothpick inserted in the center comes out clean. Cool in pans for 10 minutes, then invert onto a wire rack to cool completely.

Make the Frosting: Beat softened cream cheese and ⅓ cup powdered sugar until smooth. In a separate chilled bowl, beat cold heavy cream, ½ cup powdered sugar, and vanilla until soft peaks form. Add the cream cheese mixture to the whipped cream and beat until stiff, spreadable peaks form. Chill until ready to use.

Assemble the Cake: Place one cooled cake layer on a serving plate. If domed, level the top with a serrated knife. Spread a thin layer of frosting over the layer. Pipe a thick circle of frosting around the edge to create a dam.

Add Filling: Spoon all the cooled strawberry filling inside the frosting dam and spread evenly.

Add Top Layer and Frost: Carefully place the second cake layer on top. Apply a thin crumb coat of frosting over the entire cake. Chill for 20 minutes. Frost the top and sides with the remaining frosting. Garnish with fresh strawberries before serving.