Cook the macaroni and drain well. Place in a greased 2 qt. casserole dish. Top with sliced hot dogs.
Melt the butter on top of stove in a saucepan. Saute the shallots 2 minutes. Add the flour and make a roux. Slowly add the milk and cook until thickened a bit. Slice the Velveeta into pieces and add to milk. Stir and cook until smooth and melted.
Pour the cheese sauce over the macaroni and hot dogs. Stir to combine. Season with salt and pepper. Place in preheated 350 degree oven and bake 20 minutes.