In a large skillet over medium heat, cook the bacon until crisp. Drain on brown paper. Remove all but 1 tablespoon of fat from the pan. Place the bread slices in a food processor and pulse until coarse crumbs are formed. Reserve 1 cup breadcrumbs for Round 2 Recipe, Fried Potato Cakes. Add the remaining breadcrumbs to the skillet and cook until they are lightly toasted, about 5 minutes. Set aside
Preheat the oven to 350 degrees F. Spray a 9 by 13-inch baking dish with nonstick spray.
In a small saucepan over low heat, warm the milk and butter.
Place the potatoes into a large pot, cover with cold water, add a generous pinch of salt, and bring to a boil over medium-high heat. Cook until tender and they crumble when pressed with a fork, 15 to 20 minutes. When the potatoes are cooked through, drain them well, put them back into the pot, and mash them.
Slowly mix in the warm milk and butter mixture until incorporated. Mix in the grated cheese and cream cheese. Don't over mix or the potatoes will become gummy. Season, to taste, with salt and pepper. (Reserve 2 cups mashed potatoes for Round 2 Recipe).
Put the potatoes into the prepared baking dish, crumble the bacon over the top, and sprinkle evenly with the breadcrumbs. Bake until heated through and golden brown on top, 25 to 30 minutes. Serve garnished with chives.