1Steam potatoes in a large steamer rack set over boiling water, covered, until very tender, 20 to 25 minutes.
2Meanwhile, cook bacon in a 12-inch heavy skillet over medium heat until crisp. Transfer bacon with a slotted spoon to paper towels to drain, reserving fat in skillet. Add 2 tablespoons vinegar, sugar, and 3/4 teaspoon each of salt and pepper to hot bacon fat, scraping up brown bits.
3Transfer potatoes to a large bowl, reserving 1/2 cup steaming water. Add vinegar mixture to potatoes and smash with a potato masher to desired texture, adding reserved water if desired. Stir in dill, bacon, and vinegar, salt, and pepper to taste.
Potatoes can be made 3 hours ahead and kept at room temperature. Reheat, covered, in a microwave or in a 300°F oven.