Place sausage in large skillet with water. Cover bring to a boil over medium heat. Reduce heat to low, simmer, covered 10 minutes. Uncover and simmer until water evaporates and sausage browns lightly.
While sausage is cooking, combine sugar, mustard, caraway and dill in medium saucepan, stir until well blended. Add sauerkraut and bell pepper, stir until well combined. Cook, covered ov er medium heat 10 minutes or until very hot.
Spoon sauerkraut with bell pepper into microwavable 3 quart casserole, sprinkle with cheese. Place sausage on sauerkraut, cover. Microwave at high 30 seconds or until cheese melts.