In a large saucepan bring the milk, water, butter, grits, and salt to a boil. Reduce heat and stir occasionally until mixture is thick and grits are tender, about 20-30 minutes. Whisk in the cheese and nutmeg. Cover and set aside.

Cook the chopped bacon in a heavy skillet until brown and crisp. Transfer the bacon to a small bowl using slotted spoon. Pour off half of the drippings from skillet. Add shrimp to same skillet and cook until just pink, about 2 minutes per side. Transfer shrimp to a plate using slotted spoon. Add mushrooms to same skillet and saute until tender, about 4 minutes. Add green onions and garlic and saute 3 minutes. Return shrimp and bacon to skillet. Mix in lemon juice. Season with salt and pepper and hot pepper sauce to taste.

Bring grits to simmer, adding water by tablespoons if too thick. Spoon grits onto plates. Spoon shrimp mixture over. Sprinkle with parsley and serve. 4-6 servings. Enjoy!