Preheat oven to 375 degrees F. Butter a 2 quart baking dish or gratin pan.
Cook potatoes until almost done (there should be a slight firmness in the center). Drain and set aside.
Melt butter in a large, deep skillet over medium heat. Add the bell peppers, onion and garlic. Cook for about 5 minutes or until onion is translucent.
Add the flour and stir so there are no lumps. Cook for about 1 minute. Gradually add the half and half, whisking so there are no lumps. Stir in the cream, 2 tbs of the Parmesan cheese and about 3/4’s of the diced American cheese. Stir until cheese is melted. Add the salt, pepper and nutmeg. Reduce heat to low and simmer for 5 minutes.
Add the potatoes and leeks and stir to coat. Turn potato mixture into prepared pan. Top with reserved American cheese and the remaining Parmesan.
Bake for 20-25 minutes or until top is nicely browned and sauce is bubbling.
Whole milk may be substituted for the half and half.