Heat milk over medium-low heat in a large saucepan to 180 or until tiny bubbles form around edge. (Do not boil.) Remove from heat; gradually add flour, salt, and nutmeg, stirring until well blended. Place pan over low heat; cook 1 minute, stirring vigorously until mixture leaves sides of pan and forms a ball. Add egg, stirring vigorously; cook 1 minute. (Mixture will be thick.)
Remove from heat; add cheese, stirring vigorously until well blended. Spread mixture into a 9-inch square pan coated with cooking spray, using hands and a rubber spatula dipped in cold water. Press heavy-duty plastic wrap on surface of dough, and chill 1 hour or until firm. Invert dough onto a cutting board; cut into 16 (1-1/2-inch) squares. Cook according to Gratin or Pan-frying procedure (see page 90).