In a small saucepan, cook onions in 1 tablespoon butter for 2 minutes or until tender. Stir in the cream, mustard and remaining butter. Bring to a boil. Reduce hear; simmer, uncovered, for 5 minutes.
Reduce heat to low; stir in half of the cheese until melted. Remove from the heat. In a greased shallow 2-1/2-qt. baking dish, layer a third of the potatoes; top with a third of the sauce. Repeat layers twice; sprinkle with remaining cheese.
Bake, uncovered, at 400° for 30 minutes. Cover and bake 25-30 minutes longer or until potatoes are tender. Let stand for 5 minutes before serving.