Cheesy Potato Soup

4 medium potatoes, diced
1 large onion, chopped
1 quart water
1/4 cup (1/2 stick) butter or margarine
3 tablespoons flour
1/2 cup milk
1 1/2 cups (6 oz.) shredded sharp cheese (I use mild cheese)
1 teaspoon salt
1/4 teaspoon seasoned salt
1/4 teaspoon paprika
1/8 teaspoon ground pepper
Chopped chives (optional)

Combine potatoes, onion and water in heavy saucepan. Bring to boil, reduce heat and simmer until tender, about 20 minutes. In heavy skillet melt butter; add flour; cook and stir until mixture bubbles. Remove from heat; stir in milk. Return to heat; cook and stir until thickened. Stir mixture slowly into potatoes; cook and stir until thick. Add cheese and seasonings. Serve topped with chopped chives. Serves 4 to 6