Combine first 4 ingredients in a large saucepan; cook, uncovered, over medium-low heat, stirring frequently, until cheese melts.
Combine flour and water, stirring with a whisk; add to cheese mixture. Cover and cook over medium-low heat 15 minutes, stirring constantly, or until mixture is slightly thick. Stir in red pepper. Ladle into bowls; sprinkle with chives, and top with pretzels.