Pound the veal very lightly until very thin. Heat six tablespoons of the butter in a skillet, add the veal and cook until brown on both sides. Add the sherry and cook a few seconds longer. Remove from the heat.
To make sauce, melt the remaining butter in a saucepan, add the flour and stir with a wire whisk until blended. Meanwhile, bring the water and milk to a boil and dissolve the bouillon cube in the mixture. Add all at once to the butter mixture, stirring vigorously with the whisk until the sauce is thickened and smooth. Season with nutmeg and pepper.
Arrange the veal in a single layer in a shallow baking dish. Scrape loose the brown particles from the skillet and pour drippings over the meat. Top with the sauce and arrange cheese over all. If desired refrigerate several hours. Before serving, heat in a preheated hot oven (425 degrees) until the cheese melts and turns brown, about twenty minutes.
Recipe courtesy of The New York Times Cookbook, by Craig Claiborne