Preheat oven to 375°F and grease a 9x13-inch baking dish.
In a medium saucepan, melt the butter and diced onion over low heat until the onion is softened (3-5 minutes). Then add the flour, salt, and pepper. Cook for 1 minute.
Slowly drizzle in milk, whisking constantly. After adding the milk, continue cooking until the mixture thickens, 5-8 minutes, whisking frequently.
Remove from heat and stir in 1 cup of cheese. Continue stirring until the cheese is melted and smooth, about 30 to 60 seconds. Set aside.
Carefully set the potato slices in the bottom of the prepared baking dish (trying to keep the shape of the potato together), and fan them out in a single layer.
Top the potatoes with the cheese sauce and the remaining cup of shredded cheese.
Cover with aluminum foil and bake for 60 minutes, or until the potatoes are fork-tender.
Remove the foil and broil for 2-3 minutes, or until brown, watching carefully.
Serve hot, garnished with parsley. Add salt and pepper to taste.