Preheat oven to 325 degrees. Melt half the butter in saucepan and add onion. Cover and cook for 10 minutes - do not let brown. Mix all remaining ingredients, including butter (melted), except the bread. Lightly butter a 2 quart casserole and put in the onion. Pour in the milk and egg mixture. Place bread squares on top. Bake for 45 minutes to 1 hour in water bath. After finished cooking, let sit for a few minutes before serving.