Heat a large pot of salted water. Blanch the halved brussels sprouts for 3-4 minutes, until just barely tender. Remove from pot, drain, rinse with cold water to stop the cooking, set aside.
Place diced pancetta or bacon in a large pot on medium-low heat. Cook until most of the fat is rendered, about 8-10 minutes. Remove the pancetta from the pan, set aside, leaving the rendered fat in the pan.
Add butter to the pot and melt on medium heat. Add the shallots and gently cook until softened, 4-5 minutes. Add the flour to the butter/shallot mixture to make a roux, whisk for 1-2 minutes. Add the milk and stir with a wooden spoon until the roux is incorporated into the milk. Cook over medium low heat for several minutes, stirring, until the sauce thickens and coats the back of your spoon. Add fresh thyme and sprinkle with nutmeg.
Add 3 ounces of grated gruyere cheese into the white sauce and stir until the cheese is melted and incorporated into the sauce. Add half of the cooked pancetta back to the sauce. Taste and add more salt if necessary.
Preheat oven to 400 degrees. Butter and 8 x 12 gratin dish or casserole. Add the brussels sprouts into the cheese sauce. Transfer the cheesy brussels sprouts into the casserole dish. Sprinkle with remaining pancetta and the remaining 1 ounce of gruyere cheese. Bake for 25 minutes until top is lightly browned and bubbly. Remove from oven and let sit for 10 minutes before serving.