In medium saucepan, cook potatoes in boiling water for 15 to 20 minutes or until tender. Drain. Peel potatoes; slice.
Meanwhile, in large skillet, cook bacon until crisp. Remove bacon from skillet; drain on paper towels. Reserve 2 tablespoons drippings in skillet. Add onion; cook and stir until crisp-tender.
Add sugar, flour, salt and pepper; blend well. Gradually add water and vinegar. Cook over medium-high heat until bubbly and thickened, stirring constantly.
Stir in potatoes; cook until thoroughly heated. Crumble bacon; sprinkle over top. Garnish with parsley.