Cook macaroni in about 2 quarts boiling water just until tender to bite, 6 to 8 minutes. Drain.
Meanwhile, tear bread into 1/2-inch chunks. In a food processor or blender, combine bread, parmesan cheese, and 1/4 teaspoon paprika; whirl until mixture is coarse crumbs.
In 5- to 6-quart pan over high heat, frequently stir onion and 2 tablespoons water until onion is limp and begins to brown, about 4 minutes. Stir in flour and remaining 1/2 teaspoon paprika.
Remove onion mixture from heat and blend in milk and broth until smooth, then stir over high heat until sauce boils, about 5 minutes. Remove from heat again, add cheese, and stir until it melts. Add nutmeg, and salt and pepper to taste.
Add macaroni to cheese sauce and mix, then pour into a shallow 2- to 2 1/2-quart casserole. Sprinkle with seasoned bread crumbs.
Bake in a 450° oven until crumbs are browned, 3 to 4 minutes.