Preheat oven to 350 degrees F. Butter a 9 x 9 inch baking dish; set aside.
Bring a large pot of salted water to a boil; add the potatoes and cook for about 4 minutes, drain and set aside to cool slightly. Just enough to parboil the potatoes.
Melt the butter and saute the onions until tender. Add the drained tomatoes and cook for 4 minutes.
Place the drained potatoes in a large mixing bowl. Add salt and pepper. Stir in the onion and tomato mixture and toss. Add the sour cream and Velveeta and stir. Transfer to the prepared baking dish and bake at 350 degrees for about 35-40 minutes or until hot.
To Garnish: If desired, garnish top with a ring of chopped tomatoes all around the outside, then a ring of avocado, then green onion and make a strip of sour cream down the center. Sprinkle top with crumbled, cooked bacon.