Melt butter in large saucepan on medium heat. Add onion; cook and stir 5 minutes or until onion is tender. Add flour; cook 1 minute or until bubbly, stirring constantly.
Stir in milk. Bring to boil. Reduce heat to medium-low; simmer 1 minute.
Add remaining ingredients. Cook until VELVEETA is melted and soup is heated through, stirring occasionally.