Wash the potatoes. Peel and slice them one at a time, placing the slices in a bowl or pan of cold water to keep their color. In a bowl, mix together the sugar, nutmeg and flour. Drain the potato slices and put them in a pot. Sprinkle the sugar mixture over them. Add the water and butter. Let the potatoes come to a boil, reduce the heat, cover, and let simmer until tender, about 20 minutes. Stir lightly and serve.