Using coarse grinder, grind zucchini and onion. If large zucchini are used, remove seeds before grinding. Combine zucchini and onion with salt and let stand overnight in the refrigerator. Drain thoroughly.
Combine sugar, dry mustard, turmeric, celery seed, pepper, vinegar and nutmeg. Cook over medium heat until it begins to thicken; then add ground bell peppers and cook on low heat for 30 minutes or until desired consistency is reached.
Pour into pint jars, leaving 1/2 inch head space. Adjust lids.