Combine spinach and water in a Dutch oven. Bring to a boil; cover. Reduce heat; simmer 10 minutes. Drain well; chop.
Combine chopped spinach, egg yolks, cheese, if desired, 1/2 teaspoon salt, sugar, nutmeg, and white pepper in a medium saucepan. Cook over low heat 5 minutes, stirring constantly. Stir in 3/4 cup whipping cream; cook 2 minutes, stirring constantly. Remove from heat.
Beat egg whites (at room temperature) until stiff peaks form; gently fold into spinach. Spoon into 4 lightly greased 6-ounce custard cups. Place cups in a pan with 1 inch hot water. Bake at 325° for 30 minutes or until a knife inserted in center comes out clean.
Melt butter in a heavy saucepan over low heat; add flour, stirring until smooth. Cook 1 minute, stirring constantly. Gradually add remaining 1/4 cup whipping cream and milk; cook over medium heat, stirring constantly, until thickened and bubbly. Stir in 1/4 teaspoon salt and pepper.
Separate hard-cooked egg. Chop the white; stir into sauce. Grate yolk, and set aside.
Loosen edges of timbales with a knife. Invert custard cups onto serving plate, and turn out. Spoon sauce evenly over timbales; top with grated egg yolk.