In a sauce pan cook grits with 4 cups of salted water until thick. While grits are cooking crumble and cook sausage. When sausage is done add onion and cook for a few minutes more to soften onions. Drain.
When grits are done add egg, butter and 1 cup of the cheese to the grits. Combine the sausage and grits and pour into a 13x9 baking dish. Top with 1 cup of cheese and sprinkle with paprika. Bake in preheated 325 degree oven until bubbling and cheese is starting to brown. About 45 mins.