How to Make It
Preheat the oven to 350°. Melt 2 tablespoons of the butter in a large skillet. Add the mushrooms, season with salt and pepper and cook over moderate heat until they release their liquid, about 4 minutes. Increase the heat to moderately high and cook, stirring, until browned, about 4 minutes longer. Add the onion, bell pepper and 1 tablespoon of the butter. Cook over low heat, stirring occasionally, until the onion and bell pepper soften, about 10 minutes. Let cool to room temperature.
Mince the chopped bacon in a food processor. In a large bowl, combine the minced bacon with the veal, cracker crumbs, ketchup, horseradish, egg and the cooled mushroom mixture. Season with salt and pepper and mix thoroughly with your hands. Sauté a small piece of the meat-loaf mixture in the skillet over moderate heat and taste for seasoning. Add more salt and pepper to the meat-loaf mixture, if necessary. Pack the meat into a 2-quart loaf pan and arrange the halved bacon strips on top.
Bake the meat loaf for 1 1/4 hours, or until an instant-read thermometer inserted in the center registers 140°. Drain the pan juices into a heatproof bowl and skim off the fat; you should have 2/3 cup of juices.
Preheat the broiler. Broil the meat loaf 5 inches from the heat for 1 minute, or until the bacon is browned. Let the meat loaf rest in the pan for at least 10 or for up to 30 minutes.
Meanwhile, in a small saucepan, melt the remaining 1 tablespoon of butter over low heat. Whisk in the flour until smooth, then whisk in the reserved pan juices. Bring the sauce to a simmer, whisking constantly, until thickened. Add the sour cream and cook, stirring, until hot, about 2 minutes; do not let the sauce boil. Season with salt and pepper. Thickly slice the meat loaf and serve with the sour cream sauce.
Make Ahead: The meat loaf can be prepared through Step 2 and refrigerated overnight.
Serve With: The velvety texture and soft tannins of a medium-bodied Merlot blend nicely with the mild veal here. Look for the 1999 Columbia Crest Grand Estates from Washington State or the 2000 Château de Rougerie from France.