Peel and cut potatoes into bite-size chunks. Place in large saucepan; cover with water and bring to a boil. Cook until tender.
Preheat oven to 350F. Melt butter in large saucepan over medium heat.(OPTIONAL: May, if desired, add 2 large onions, chopped, cook until translucent. Do not brown) Sprinkle in flour; stir until butter is absorbed. Do not brown.
Add milk, stirring briskly with a whisk. Add cheese and cook, stirring until cheese melts and sauce thickens. Add potatoes and stir well.
Spoon into a 13x9-inch casserole dish. Bake 30 minutes.
Remove from oven. Sprinkle 1/4 cup shredded cheddar cheese and crumbled bacon on top.