Saute onion and pepper (if using) in butter. Set aside to cool.

Butter 6 cup baking pan. Cut bread diagonally in quarters. Make a layer of bread in the pan (it does not have to cover the pan exactly.)

Spread half the cheese over the bread. Sprinkle the cooked onion over that.

Use remaining bread to make a second layer. Spread the rest of the cheese over it.

Beat the eggs. Beat in the milk, until well blended. Pour mixture over the bread and cheese.

Cover and refrigerate at least 1 hour, longer if convenient.

Bake at 350 with the cover on, for half an hour, remove the cover, and bake another half hour - one hour altogether.

Remove from oven and let set for 15 minutes before cutting.