In a medium skillet, melt 2 tablespoons of butter over medium-low heat. Add the onions and toss to coat. Cover for 5 minutes to help the onions wilt. Season with salt and pepper and cook, stirring occasionally, until golden brown. Sprinkle with sugar and cook until deeply amber in color. Set aside to cool.

In a 4 qt pot or dutch oven, combine cream, half and half, garlic, thyme, bay leaves, and nutmeg. Season with salt and pepper. Add potatoes and bring to a gentle simmer over low heat. Simmer for 15 minutes, or until potatoes start to become tender. Season to taste with salt and pepper. Remove from heat and rest for 10 minutes.

Preheat the oven to 375 F. Butter a 3 qt baking dish with the remaining butter and set aside. Discard thyme sprigs and bay leaves from the potatoes.

Using a slotted spoon, transfer half of the potatoes to the prepared baking dish. Layer in half of the caramelized onions and cheese and cover with the rest of the potatoes. Pour the remaining creamy sauce over the potatoes and top with the remaining onions and cheese.

Bake uncovered for 35-40 minutes until cheese is bubbly and golden brown and potatoes are tender. Rest the potatoes for 15 minutes before serving. Top with more fresh thyme, if desired.