Make grits: In a large pan, bring milk, 3 cups water and 1/4 teaspoon salt to a boil. Add cornmeal in a steady stream, whisking, until no lumps are visible. Cover, reduce heat to low and simmer, stirring and scraping pan every 10 minutes, until tender, 35 minutes. Uncover; cook 5 minutes longer, stirring.
While grits cook, fry bacon in a large skillet over medium heat, turning, until crisp, 5 to 6 minutes. Drain on paper towels. Let cool; crumble.
Add bell peppers, white parts of scallions, 1/8 teaspoon salt and 1/4 teaspoon pepper to skillet with bacon fat. Sauté until bell peppers are crisp-tender, 7 minutes. Stir in shrimp, pepper sauce and 1/2 cup water. Sauté until shrimp turn almost opaque, 3 minutes. Remove from heat.
Remove grits from heat; stir in cheese. Divide among 4 bowls; top with shrimp mixture. Garnish with bacon and scallion greens.