Butter a 3-quart baking dish. Line up the Tater Tots in the dish.
Heat the olive oil in a large skillet over medium heat. Add the sausage and onion and cook, breaking up the sausage with a wooden spoon, until browned and cooked through, 8 to 10 minutes. Set aside to cool slightly, then sprinkle the mixture over the Tater Tots.
Whisk the milk, half-and-half, seasoned salt, cayenne, eggs, bell peppers and half of both cheeses in a large bowl; season with salt and pepper. Pour over the casserole, then top with the rest of the cheese. Cover with foil and refrigerate overnight.
Preheat the oven to 350˚. Bake the casserole, covered, until just starting to set around the edges, about 25 minutes. Remove the foil and continue to bake until the cheese is browned and bubbly and the casserole is cooked through, another 20 to 35 minutes.