Preheat oven to 400 degrees F. Melt butter in heavy large skillet over medium heat. Add shallots and mushrooms and saute until tender, about 5 minutes. Season to taste with salt and pepper. Arrange half of mushroom mixture in bottom of 13x9 inch glass baking dish. Arrange half of potatoes over. Combine salt, pepper and nutmeg in small bowl. Sprinkle half of mixture over potatoes. Spoon remaining mushroom mixture over. Arrange potatoes over mushroom mixture. Sprinkle remaining salt mixture over. Combine cream and stock in large bowl. Pour over vegetables. Cover tightly with foil. Bake until vegetables are almost tender, about 45 minutes. Increase oven temperature to 450 degrees F. Uncover pan. Bake until juices thicken, about 10 minutes. Sprinkle with cheese. Bake until cheese melts and is golden brown, about 10 minutes. Cool gratin 15 minutes before serving.