Preheat the oven to 350°F.
Shred the Monterey Jack, mozzarella, and sharp cheddar cheeses. Reserve 2 cups of the shredded cheddar cheese for the topping.
Cut the cream cheese into small cubes and set aside.
Dice the jalapeños and discard the seeds for a milder flavor.
Cook the elbow macaroni according to the package directions. After cooking, allow the pasta to sit in the hot water for an additional 10 minutes to help prevent it from absorbing too much cheese sauce during baking.
Drain the macaroni and rinse it gently. Set aside.
Place the bacon in a large pan over medium heat. Cook until crispy, approximately 4 to 5 minutes.
Remove the bacon from the pan and drain it on paper towels.
Reserve 2 tbsp of bacon fat in the pan and discard the remaining fat.
Add the unsalted butter to the reserved bacon fat and allow it to melt.
Add the flour, mustard powder, cayenne pepper, and paprika. Whisk until fully combined.
Cook the flour mixture for approximately 15 seconds to remove the raw flour taste and develop the flavor of the spices.
Slowly add the whole milk while whisking continuously to keep the sauce smooth and well combined.
Add the kosher salt and coarse ground black pepper.
Continue cooking the sauce for approximately 5 minutes, or until it thickens slightly. Turn off the heat.
Remove 1 cup of the hot milk mixture and transfer it to a larger glass measuring cup or bowl.
Allow the milk mixture to cool in the refrigerator for 3 to 5 minutes.
Add the egg to the cooled milk mixture and whisk thoroughly until fully combined.
Return the pot to medium-low heat.
Slowly pour the egg and milk mixture back into the remaining sauce while whisking continuously.
Add the Monterey Jack cheese, mozzarella cheese, and 1 cup of the shredded sharp cheddar cheese.
Whisk until the cheeses are fully melted and the sauce is smooth and creamy.
Add the cooked macaroni and half of the crumbled bacon to the cheese sauce.
Stir until the macaroni is evenly coated with the sauce.
Add the cream cheese cubes and half of the diced jalapeños. Stir gently until evenly distributed.
Transfer the macaroni mixture to a 9x13-inch baking dish and spread it evenly.
Top with the reserved 2 cups of shredded cheddar cheese, the remaining crumbled bacon, and the remaining diced jalapeños.
Bake uncovered for 30 minutes, or until the cheese is melted, bubbly, and lightly golden.
Remove from the oven and allow the dish to rest for a few minutes before serving.