Preheat oven to 350 degrees.
Butter a 2 quart baking pan. Spread each slice of challah with mustard. In olive oil saute the garlic for a few seconds. Add mushrooms and zucchini and saute for 10 minutes or until tender. If mushrooms and squash are watery, drain them. Season with salt and pepper and cool to room temperature.
Arrange bread (mustard side up) mushrooms and squash, and cheese in alternate layers, ending with a layer of bread, mustard side down.
Mix the eggs with milk and pour this over the bread. Poke holes through the bread several times and let this stand for 30 minutes.
Place baking dish in a larger baking pan and pour enough hot water to come halfway up the sides of the dish. Bake for 45 minutes to an hour or until custard has set. Cool for 10 minutes.
Serve each portion surrounded by tomato sauce and garnish with chives, cheese and red pepper flakes if you wish.