Brown sausage in a large skillet, stirring until it crumbles. Drain well, and set aside.
Bring water to a boil in a large saucepan, and stir in grits. Return to a boil; cover, reduce heat, and simmer 5 minutes, stirring occasionally. Remove from heat; add cheese and next 3 ingredients, stirring until cheese melts. Stir in sausage and eggs.
Spoon mixture into a lightly greased 13" x 9" x 2" baking dish; sprinkle with paprika. Bake, uncovered, at 350° for 1 hour or until golden and heated. Let stand 5 minutes before serving. Garnish, if desired.
Make-Ahead: Prepare grits mixture as directed above, but do not bake. Cover and chill overnight. Remove from refrigerator; let stand, covered 30 minutes. Uncover and bake as directed.