Place potatoes in large saucepan. Cover with water; bring to a boil. Cook over medium-high heat for 8-10 minutes or until just fork tender; drain.
Meanwhile, heat butter in medium saucepan over medium heat. Stir in flour, salt and pepper. Gradually stir in evaporated milk, water and 1/3 cup bacon. Cook for about 8-10 minutes, stirring constantly, until mixture comes to a boil. Remove from heat. Stir in 1-1/2 cups cheese and green onion.
Layer half of potatoes in ungreased 3-quart microwave-safe dish. Pour half of sauce over potatoes. Top with remaining potatoes and sauce. Top with remaining cheese and bacon. Microwave uncovered on HIGH (100 percent) power for 2-3 minutes or until cheese is melted.
Nutrition Information per serving: 110 calories, 40 calories from fat, 4.5 grams total fat, 2.5 grams saturated fat, 15 mg cholesterol, 260 mg sodium, 13 grams carbohydrate, 1 gram fiber, 3 grams sugars, 7 grams protein, 15 percent vitamin C, 10 percent calcium