In a medium bowl mix together flour, salt, nutmeg, and pepper.
In a separate bowl, beat together egg and milk. Add egg mixture to flour mixture and stir until combined. (The dough will be the consistency of drop biscuit dough.)
Cover the bowl and let the dough rest on the counter for 30 min - 1 hour.
For The Caramelized Onion Topping
While the dough is resting, caramelize your onions. Melt butter in a large, non-stick frying pan. Once butter is good and hot, add sliced onions. Stir well and cover. Heat over medium-high heat, stirring every 3-5 minutes. When you notice the onions starting to darken, reduce the heat to just above medium, and continue cooking and stirring every 2-4 minutes. The onions are done when they are deep golden brown and sweet smelling (15-20 min). (This is a slow process, but the end result is worth it.)
Remove onions from the pan to a small bowl for serving. (Keep you pan here, we’ll be using it later.)
Finishing off the Spatzle
Near the end of the dough’s resting time heat 4 qts of water to boiling in a soup pot. Once the water is boiling, add a teaspoon of salt to the water.
Lightly flour a flat board for cutting your spatzle. (We find a small wooden cutting board works well.)
Spread the dough onto the board in an even layer. Flour the top of the dough.
Using a knife, spatula, or similar flat surface, scrape small strands from the edge of the dough into the boiling salt water. (This takes a bit of practice and, at times, quite a bit of flour, but don’t get discouraged. These are more rustic looking spatzle than you will find in the store, so whatever shape you get will work.)
The spatzle is done when it floats to the surface. Spoon it out with a slotted spoon into the empty onion pan. Continue with the remaining spatzle until all is cooked and in the pan.
Making Kasespatzle
Heat the spatzle over medium-high heat in the frying pan.
Add 1 c cheese and ¼ c of the boiling liquid. Mix and heat until the cheese has melted and coated the spatzle.