Preheat oven to 400 degrees F.
In a roasting pan roast the beef in the middle of the oven for 25 to 30 minutes, or until an instant read thermometer registers 120 degrees F when inserted into the beef. Let the fillet cool completely and discard the bacon and the strings. Skim the fat from the pan juices and reserve the pan juices.
In a heavy skillet cook the mushrooms in the butter, salt and pepper over moderately low heat, stirring, until all the liquid they give off is evaporated and the mixture is almost dry. Add heavy cream and cook until cream thickens and coats the back of a spoon, about 5 minutes. Let cool completely.
Spread the fillet evenly with the pate de foie gras, covering the top and sides, and spread the mushrooms evenly over the pate de foie gras. On a floured surface roll 1 pound of the puff pastry into a 20 by 12-inch rectangle, or large enough to enclose the fillet completely. Slightly beat the egg white in a small bowl and set aside. Beat the egg yolk with the water to make an egg wash and set aside. Invert the coated fillet carefully under the middle of the dough, and fold up the long sides of the dough to enclose the fillet brushing the edges of the dough with some of the egg white to seal them. Fold ends of the dough over the fillet and seal them with the remaining egg white.
Transfer the fillet, seam side down to a jelly-roll pan or shallow roasting pan and brush the dough with some of the egg wash. Roll out the additional dough and cut out shapes with decorative cutters. Arrange the cutouts on the dough decoratively, brush them with the remaining egg wash, and chill the fillet for at least 1 hour and up to 2 hours.
Bake the fillet in the middle of a preheated 400 degree F oven for 30 minutes. Reduce the heat to 350 degrees F, and bake the fillet for 5 to 10 minutes more, or until the meat thermometer registers 130 degrees F for medium-rare meat and the pastry is cooked through. Let the fillet stand for 15 minutes. In a saucepan boil the reserved pan juices and the Madeira until the mixture is reduced by 1/4. Add the arrowroot mixture, the broth, the truffles, and salt and pepper, to taste, and cook the sauce over moderate heat, stirring, being careful not to let it boil, for 5 minutes, or until it is thickened. Loosen the fillet from the jelly-roll pan, transfer it with 2 spatulas to a heated platter, and garnish it with watercress. Serve the fillet, cut into 3/4-inch-thick slices, with the sauce.
Recipe courtesy of Sara Moulton