Preheat the oven to 350°F (175°C). Lightly grease a 2-quart baking dish with butter or nonstick cooking spray to prevent the dressing from sticking during baking.

In a large saucepan, bring 4 cups of water to a boil over medium-high heat. Gradually whisk in the uncooked grits, stirring continuously to prevent lumps from forming.

Reduce the heat to low and allow the grits to simmer gently. Stir frequently to prevent sticking and scorching. If the grits become overly thick during cooking, add additional water 1/4 cup at a time until the mixture remains soft and creamy. Continue cooking until the grits are tender and thick, producing approximately 5 cups of cooked grits, about 1 hour.

Remove the saucepan from heat and allow the cooked grits to cool slightly. Once cooled enough to handle, whisk in the beaten eggs and evaporated milk, stirring until fully combined and smooth.

Stir in the crumbled bacon, fresh chives, paprika, salt, and black pepper. Add 1 1/2 cups of the grated Cheddar cheese, reserving the remaining 1/2 cup for topping. Mix thoroughly until all ingredients are evenly distributed.

Transfer the mixture into the prepared baking dish, spreading it evenly. Sprinkle the remaining 1/2 cup of Cheddar cheese over the surface to create a golden, flavorful crust.

Place the baking dish on a baking sheet and transfer it to the oven. Bake for approximately 1 hour, or until the top is golden brown and the center is set yet still fluffy.

Remove the dish from the oven and allow the dressing to rest for 5 minutes before serving.