Melt butter in a large nonstick skillet over medium-high heat. Add onion, and sauté 4 minutes. Reduce heat; cook 10 minutes or until golden brown, stirring occasionally. Add bell pepper; cook for 1 minute. Remove from heat; stir in bacon.
Arrange 3 cups bread in an 11 x 7-inch baking dish coated with cooking spray; top with half of onion mixture. Repeat layer with remaining bread and onion mixture.
Combine milk and next 5 ingredients (milk through eggs) in a medium bowl; stir well with a whisk. Pour egg mixture over bread mixture, and top with the cheese. Cover and refrigerate at least 8 hours or overnight.
Preheat oven to 375°.
Let the casserole stand 30 minutes at room temperature. Uncover and bake at 375° for 40 minutes or until golden brown. Let stand 5 minutes before serving.