This is a "must have" side dish for my family's Thanksgiving. Do NOT use "pickled" or cocktail onions, but plain ones in brine, such as Aunt Nellie's brand "Holland style Pearl Onions" in a CLEAR GLASS JAR. You could pre-cook frozen pearl onions, but the jarred ones are way better/softer. The Sherry is OPTIONAL. I have NOT made this using "regular" fresh onions, but I think pearl onions are way better in this dish. WalMart sells Aunt Nellie's in a jar, and I've found it at QFC (Kroger affiliate) in WA state (& sometimes Albertsons).
Open jar and drain onions. Preheat oven to 350 Deg. F.
Melt butter in a 2-quart sauce or saute pan over medium heat. Turn heat to low and stir in the flour. Cook for 2-3 minutes, stirring constantly (you must cook a little to avoid a "raw flour" flavor). Stir in Cream (or Half N Half) and sherry. stir to blend.
Stir in Parmesan, mustard powder, nutmeg and salt and pepper to taste. Stir well to thoroughly combine ingredients and melt cheese.
Grease a small oven baking dish (or spray with nonstick cooking spray). Put drained onions into baking dish, then cover thoroughly with white sauce mixture. Sprinkle with cheddar cheese over top, then sprinkle on Paprika over top.
Bake at 350 deg. F. for 35-40 minutes, until mixture is bubbly and hot. If desired, broil the top briefly until golden brown.
Note: You can make this one day ahead and partially bake. Then finish baking for 10-15 minutes on the day you will be serving it.