Heat the butter in a medium-size saucepan over medium heat until melted. Add the flour and whisk to blend. Season with salt and pepper, and add the nutmeg. Cook, stirring, for 2 minutes, then slowly add the milk and whisk to blend. Bring the mixture to a boil, then reduce the heat to medium-low and, with a wooden spoon, stir constantly until it thickens enough to coat the back of the spoon, about 4 minutes. Add the cheese and whisk until it melts completely. Remove from the heat and use warm. Can be refrigerated for up to 2 days, then reheated on low heat, with a little liquid added if necessary.
Yield: about 2 1/2 cups