Cook and stir onion in 1 Tb. butter in 2-quart pan on medium heat until onion is tender. Add remaining 1 TB. butter and flour, cook 1 minute or until hot and bubbly, stirring constantly. Gradually add milk, stiring until well blended. Bring to boil. Reduce heat to meduim-low; simmer 1 minute. Add remaining ingredients; cook until Velveeta is melted and soup is heated through, stirring occasionally.