Käsespätzle is a popular dish in Germany and people like to recreate it in the US because it is so simple and tastes so good. Cheese Noodle Casserole is foolproof if you take the time to make it right. Homemade Spätzle are the best for this dish, although you can substitute dried noodles from the store, if necessary.
Caramelizing the onions takes about 1 hour, noodles - 30 minutes and casserole bakes about 35 minutes.
Start Browning Onions Early
Start by making the caramelized onions about one hour before the casserole needs to go into the oven. Heat the butter and oil in a non-stick pan on medium, turn heat to low and add onions. Stir every few minutes for about an hour, or until onions are lightly browned and sweet enough for your taste. Here is more information on caramelizing onions.
Turn off heat and set onions aside.
Make the Spätzle
Here is a step by step guide to making Spätzle with a Spätlebrett (wooden board used to make drop noodles). You may use a colander to form the noodles or a grater - like device with a hopper on it called a Spätzle Maker.
Place a large pot of water on to boil. You may add salt if you wish, I do not.
To make the dough, mix the eggs with water and add to the flour and salt. Mix or beat for several minutes, or until dough is smooth. Let the dough rest for 10 minutes, then beat it again. Add water or flour to adjust consistency to a thick batter (a little thinner than brownie batter).
Place half of the dough in the hopper of the Spätzle Maker (or see here for more instructions) which is placed over the simmering water. Push and pull the hopper back and forth, creating a dough wave inside the hopper. Little bits of dough are pushed out the other side and drop into the water. They are fatter and more teardrop shaped than the Spätzle you make with a board.
The noodles drop to the bottom of the pot, then rise to the surface. Let them sit there for another two or three minutes, then scoop them out with a slotted spoon or small sieve. Rinse briefly in hot water, then drain well and set aside.
Using the second half of the dough, make another batch of noodles. If the noodles stick to the bottom of the pan, give a quick stir to loosen. They should then rise to the top.
Butter and line a 1 1/2 - 2-quart casserole dish with bread crumbs.
When noodles are done, add them to the (cooled) pan with the onions. Add the grated nutmeg and 3/4 of the grated cheese and stir to mix.
Gruyère cheese can be used, as well as Emmental or Raclette, but any smooth melting, slightly stinky cheese can be substituted as long as you like it.
Spoon noodles into the casserole, sprinkle with remaining cheese and bake, covered, at 350ºF for 20 minutes, then uncovered for 15 minutes. If you like, brown the cheese topping with the broiler during the last 5 minutes.