Dissolve yeast and sugar in warm water in a large bowl; let stand 5 minutes. Stir in olive oil. Stir in flour and next 3 ingredients until a soft dough forms.
Turn dough out onto a lightly floured surface. Knead in 1 cup cheese; knead 5 minutes or until smooth and elastic. Shape dough into a ball, and place in a lightly greased bowl, turning to grease top. Cover and let rise in a warm place (85°), free from drafts, 45 minutes or until doubled in bulk. Punch dough down.
Shape dough into a round loaf, and place on bottom of bread cloche sprinkled with flour. Cover with bread cloche dome lid. Let rise 25 minutes.
Preheat oven to 450°. Cut 3 or 4 (1/4-inch-wide) slices into top of loaf. Combine egg and 1 tablespoon water; brush on top of dough. Sprinkle loaf with remaining 1/2 cup cheese. Bake, covered with bread cloche dome lid, 45 minutes or until loaf sounds hollow when tapped; let cool.