In a 2 quart saucepan, cook onion in butter until tender. Stir in flour, salt and pepper; cook over low heat until mixture is bubbly, stirring constantly. Remove from heat; gradually stir in milk and 1 1/2 cups cheese. Bring to a boil, stirring constantly; cook for 1 minute.
In an ungreased 1 1/2 quart casserole dish, place potatoes; cover with cheese sauce.
Bake, uncovered, at 325° F for 1 hour.
Mix remaining cheese and bread crumbs; sprinkle over potatoes. Sprinkle with paprika.
Bake, uncovered, at 325° F for 15 to 20 minutes, until top is brown and bubbly.Servings: 4