In a medium skillet, melt 2 tablespoons of butter over medium-low heat. Add the onions and toss to coat. Cover and cook for 5 minutes. Season with salt and pepper, then cook until golden brown. Sprinkle with sugar and cook until deeply amber. 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, until potatoes are just tender. Remove from heat and rest for 10 minutes.

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

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

Bake uncovered for 35-40 minutes until cheese is bubbly and golden brown and potatoes are tender.

Rest for 15 minutes before serving. Top with more fresh thyme, if desired.