Rinse and peel potatoes; cut into 1/2-inch chunks.
In a 2- to 3-quart pan over high heat, combine potatoes, onion, 2 3/4 cups broth, and sherry. Bring to a boil, reduce heat, cover, and simmer until the potatoes mash easily, about 20 minutes.
In a blender or food processor, whirl potato mixture until smooth. Return to pan and add half-and-half. Quick-chill soup (nest soup-filled pan in ice water and stir often until soup is cool, 15 to 20 minutes), or cover and refrigerate until cold, at least 1 hour or up to 1 day. Stir in more broth if a thinner consistency is desired.
Meanwhile, in an 8- to 10-inch frying pan over high heat, stir bacon frequently until crisp, 4 to 5 minutes. With a slotted spoon, transfer bacon to towels to drain. Discard pan drippings.
Ladle soup into wide bowls. Sprinkle equally with bacon and chives. Add salt and pepper to taste.