Combine squash, salt, and pepper; stir well. Spoon half of mixture into a lightly greased 2- quart casserole. Sprinkle 3/4 cup cracker crumbs and 1 1/2 cups cheese over squash. Repeat layers with remaining squash and cracker crumbs. Pour milk over top, and dot with butter. Bake, uncovered, at 350° for 30 minutes.
Sprinkle remaining 1/2 cup cheese over top; bake 10 minutes or until cheese melts.