2 1/2 pounds medium Idaho potatoes, peeled and sliced lengthwise 1/8 inch thick
Preheat the oven to 400�. Melt the butter in a large heavy saucepan. Add the onions and cook over high heat, stirring, until golden, about 8 minutes. Add the garlic, bay leaves, nutmeg, 1 tablespoon coarse salt and 3/4 teaspoon pepper and cook for 30 seconds. Add the heavy cream and milk and bring to a boil. Remove from the heat, cover, and let stand for 5 minutes.
In a medium bowl, toss the cheese with the bread crumbs, olive oil, 1/2 tablespoon of the sage, 1/4 teaspoon coarse salt and 1/4 teaspoon pepper.
Remove the bay leaves from the onion mixture and stir in the remaining 2 tablespoons sage. Put the sliced potatoes in a large bowl, add the onion mixture and toss gently. Spread half of the potatoes and liquid in a 2-quart nonreactive baking dish and sprinkle 2/3 cup of the cheese bread crumbs over the top. Cover with the remaining potatoes and press firmly to pack them down. Spoon the remaining liquid over the potatoes and cover with the remaining bread crumbs.
Bake in the middle of the oven for about 1 hour, or until the potatoes are tender and the top is golden; if they brown too quickly, loosely cover the dish with foil.