Preheat the oven to 400 degrees F.
In a large, heavy saucepan, melt the butter; turn temperature to medium high and add the onions, sauté until golden, about 8 minutes.
Add the garlic, bay leaves, nutmeg, 1 tablespoon salt, and 3/4 teaspoon freshly ground pepper, stir well and cook for 1 minute, then add the cream and milk and bring to a boil; remove saucepan from the heat, cover, and set stand for 5 minutes.
In a medium-sized bowl, toss the grated cheese together with the dry bread crumbs, the olive oil, 1/2 tablespoon of the chopped sage, 1/4 teaspoon salt, and 1/4 teaspoon freshly ground pepper.
Locate the bay leaves in the onion mixture and remove them, then add the remaining sage and stir.
In a large bowl, gently toss together the sliced potatoes and onion mixture.
Spread half of the potato mixture in the bottom of a pan-sprayed (I use an olive oil mister) 2-quart baking dish, then sprinkle 2/3 cup of the bread crumb mixture over the top; spread the remaining potato mixture over, pressing down firmly to pack them down, then cover with remaining bread crumbs.
Bake at 400 degrees F for about 1 hour, or until the potatoes are tender and the top is a nice, golden brown (if the potatoes brown too quickly, loosely cover the baking dish with foil).
These can be baked up to 5 hours ahead (let stand at room temperature, not in the refrigerator) of serving time then reheated in the oven (preferably, although doing it in the microwave would work in a pinch but the topping won't be crisp if you do so).
I found this recipe at Gail's Recipe Swap in 1998 from "peggyor."