Begin by making the Smoked Gouda Grits: In a four quart Dutch oven, bring the water, salt, and milk to an almost boil. Stir in the grits and cook over low heat for 15 minutes, whisking occasionally. Stir in the butter. Cover the pot and set aside until the shrimp are ready.
In a second Dutch oven, cook the bacon on medium heat until it's crispy. Remove the bacon and dry it on paper towels.
To the bacon grease add the butter. Cook on low heat until the butter melts, then add the flour and cook and stir until the roux is the color of peanut butter.
As soon as you achieve this color add the onion, peppers, garlic, and salt, and pepper. Cook on medium heat for about 12 minutes, until the veggies are soft and tender. Add the chicken stock and simmer for two minutes.
Add the shrimp, Worcestershire, hot sauce, paprika, lemon juice, paprika, parsley, thyme, and the cooked bacon. Cook on medium heat for about six minutes, or until the shrimp turn pink and are cooked through. Also, stir the cheese into the grits.