Cook the bacon until crispy, reserving 2 tablespoons of the drippings. Drain and crumble.
Place the butter and bacon drippings in a large microwave-safe dish (I use a 1-quart pyrex measuring cup). Microwave on high until butter is melted.
Stir in flour and whisk until smooth. Microwave on high for 2 minute, stopping half way through to stir. Slowly whisk in the hot milk. Return to microwave and cook for two or three more minutes on high, stirring occasionally, until mixture thickens slightly. Stir in salt, cayenne, and nutmeg.
Spread a third of the sliced potatoes evenly in the bottom of the buttered casserole dish. Sprinkle evenly with a third of the cheese, 1/3 cup green onions, and a third of the crumbled bacon. Spread evenly with a third of the sauce. Repeat to make 3 layers, except do not put cheese on the top layer.
Cover tightly with foil and bake for 1 hour or until potatoes are tender.
Remove foil and sprinkle remaining cheese on top. Bake until cheese is bubbly.