Preheat oven to 400 degrees. Spray Pam in a 1 quart casserole dish.

Layer 1/2 of the potatoes into bottom of the casserole dish. Next layer with onion slices, and add the remaining potatoes. Season with salt and pepper to taste.

In a medium saucepan, melt butter over medium heat. Mix in the flour and salt, and stir constantly with a whisk for about a minute. Stir in milk. Cook until mixture has thickened. Stir in 1 1/2 cups shredded cheese, and continue stirring until melted. Pour cheese over the potatoes. Sprinkle 1/2 cup shredded cheese on top and cover the dish with aluminum foil.

Bake 1 1/2 hours in the preheated oven.