Melt butter in a medium saucepan over low heat; whisk in flour until smooth. Cook 1 minute, whisking constantly. Gradually whisk in milk; cook over medium heat whisking constantly, until sauce is thickened and bubbly. Stir in green pepper and next 4 ingredients.
Layer half of potatoes in a lightly greased 13" x 9" baking dish. Spoon half of sauce over potatoes; top with half of cheese. Repeat procedure with remaining potato slices, sauce, and cheese.
Bake, covered, at 425° for 30 minutes. Uncover and sprinkle with breadcrumbs. Bake 15 more minutes or until golden.