Prepare grits according to package directions, using milk, stock, and salt. Remove from heat; let stand 5 minutes. Add cheese, bacon, chives, and pepper, and stir until cheese is melted. Spoon mixture into a lightly greased 9-inch square pan; chill 4 to 24 hours. Invert grits onto a large cutting board. Cut into 3/4-inch-thick, 4-inch-long strips.
Place flour in a shallow dish. Whisk together eggs and water in a second shallow dish. Place panko in a third shallow dish. Dredge grit fries in flour; dip in egg wash, and roll in panko, pressing gently to adhere. Place grit fries in freezer for 15 minutes.
Pour oil to a depth of 1 inch in a large, heavy skillet; heat over medium-high to 350°F. Fry grit fries, in batches, in hot oil until golden brown, 3 to 4 minutes. Drain on paper towels, and sprinkle with additional salt and pepper to taste. Place on a wire rack in a rimmed baking sheet, and keep warm in a 225°F oven up to 30 minutes, if desired. Serve warm with Smoky Hot Ketchup.