1Heat oven to 350°F. Spray 1 1/2-quart casserole with cooking spray.
2In 2-quart saucepan, heat milk, water, salt and pepper to boiling. Gradually add grits, stirring constantly; reduce heat. Simmer uncovered about 5 minutes, stirring frequently, until thickened. Stir in cheese and onions.
3Stir 1 cup of the grits mixture into eggs, then stir back into remaining grits in saucepan. Pour into casserole. Cut butter into small pieces; sprinkle over grits. Sprinkle with paprika.
4Bake uncovered 35 to 40 minutes or until set. Let stand 10 minutes before serving.