Make a deep horizontal slit in the steak to form a pocket and set aside. Cook the green pepper in salted water for five minutes, drain and set aside. Stuff the steak with the bacon, chiles, and green pepper. Sew pocket shut. In a heavy skillet brown the meat in the reserved bacon drippings, then transfer to a 12x8" baking dish. Combine tomato sauce, sugar, vinegar, salt and bay leaf in the skillet. Heat, stirring constantly, until the sugar dissolves. Pour half of this sauce over the meat, reserving the rest. Cover the baking dish and bake 1 1/2 hours, basting with the pan juices occasionally. When meat is tender remove from oven and transfer meat to a heated platter. Skim any fat from the pan juices, then add water to the juices to make 2 1/4 cups liquid. Put liquid in skillet. Blend reserved sauce with the flour, and stir into the liquid. Cook and stir until thick and bubbly.

Spoon sauce over the meat and serve.