Melt butter in a 4- to 5-quart pan over medium-high heat; add shallots and stir often until limp, about 3 minutes.
Sprinkle flour over shallots and stir until well mixed, about 1 minute. Whisk in milk and stir until mixture boils and thickens, about 5 minutes. Add sherry and salt and pepper to taste; reduce heat and simmer, stirring occasionally, to blend flavors, about 5 minutes.
Meanwhile, toast bread; trim off and discard crusts if desired. Rinse and drain shrimp. Add shrimp to sauce and stir often just until simmering again, about 2 minutes.
Set a slice of toast on each plate. Spoon hot shrimp Newburg equally over toast.