Preheat oven to 350°. In a large saucepan, bring water to a boil. Slowly stir in grits and salt. Reduce heat; cover and simmer until thickened, 5-7 minutes. Cool slightly. Gradually whisk in milk, butter and eggs. Stir in cheese, Worcestershire sauce and cayenne.
Transfer to a greased 2-qt. baking dish. Sprinkle with paprika. Bake, uncovered, until bubbly, 30-35 minutes. Let stand 10 minutes before serving.