Heat oven to 350°F. Spray 13x9-inch (3-quart) glass baking dish with nonstick cooking spray. In sprayed baking dish, combine potatoes and cheese; toss to mix.
Melt margarine in large saucepan. Stir in flour; cook over medium heat until bubbly, stirring constantly. Gradually add milk, stirring constantly. Add salt, onion powder, pepper and nutmeg; mix well. Cook and stir until mixture comes to a boil. Pour over potato mixture.
Bake at 350°F. for 55 to 65 minutes or until mixture is set and top is lightly browned.