Heat 1 inch salted water (1/2 teaspoon salt to 1 cup water) to boiling. Add potatoes. Heat to boiling; reduce heat. Cover and cook until tender, 20 to 25 minutes. Drain and cool.
Fry bacon in 8-inch skillet until crisp; drain. Cook and stir onion in bacon fat until tender. Stir in flour, sugar, salt, celery seed and pepper. Cook over low heat, stirring constantly, until mixture is bubbly; remove from heat. Stir in water and vinegar. Heat to boiling, stirring constantly. Boil and stir 1 minute; remove from heat.
Crumble bacon into hot mixture, then slice in warm potatoes. Cook, stirring gently to coat potato slices, until hot and bubbly.
Prick potatoes with fork to allow steam to escape. Arrange potatoes about 1 inch apart in circle on microwavable paper towel in microwave. Microwave on high (100%) until tender, 11 to 13 minutes. Let stand 1 minute.
Microwave bacon uncovered in square microwavable dish, 8x8x2 inches, until crisp, 4 1/4 to 4 1/2 minutes; drain. Stir onion into bacon fat. Microwave uncovered until onion is tender, about 2 minutes. Stir in flour, sugar, salt, celery seed, pepper, water and vinegar. Microwave uncovered, stirring every 2 minutes, until mixture is thick and bubbly, about 5 minutes.
Slice potatoes into hot mixture; stir gently. Microwave uncovered until potatoes are hot, about 1 minute. Crumble bacon into potato mixture; stir.