Combine bread slices and milk in a medium saucepan. Cook over medium heat until bubbles appear around edge of pan. Stir in butter, salt, pepper, and cheese; cook mixture over low heat, stirring constantly, until butter and cheese melt.
Beat egg yolks in a medium mixing bowl until thick and lemon colored. Gradually stir one-fourth of hot cheese sauce into yolks; add to remaining cheese sauce, stirring constantly. Cook 1 to 2 minutes. Remove from heat. Let cool.
Beat egg whites (at room temperature) until stiff but not dry. Gently fold into cheese mixture. Spoon into a lightly greased 1- quart soufflé dish or casserole. Place in a pan of hot water; bake at 375° for 45 minutes or until browned and puffed. Serve immediately.