Fry bacon until crisp; drain on paper towels. Crumble bacon and set aside.
Place squash and onion in a large skillet over medium heat; pour in water. Cover, and cook until squash is tender, about 5 minutes. Drain well, and place in a large bowl.
Mix cracker crumbs, bacon, and cheese together in a medium bowl. Stir half of the cracker mixture into the cooked squash and onions.
Mix eggs and milk together in a small bowl, then add to the squash mixture.
Stir in 1/4 cup melted butter, and season with salt and pepper. Spread into the prepared baking dish. Sprinkle with remaining cracker mixture, and dot with 2 tablespoons butter.
Bake in the preheated oven until lightly browned, about 25 minutes.
Notes
Drain Excess Water. Squash holds a lot of moisture, so after cooking it, drain or pat it dry to prevent a soggy casserole.
Slice Squash Evenly. Cutting the squash into uniform slices makes for even cooking and a consistent texture throughout the dish.
Use Fresh Ingredients – Fresh squash, cheese, and herbs will enhance the flavor of the casserole, giving it a vibrant and delicious taste.
Bake Until Golden – Keep an eye on the casserole in the oven and bake until the top is golden and bubbly for that perfect finish.