1can, 4.5-ounce chopped mild green chiles, drained
Preheat the oven to 375°F. Melt 3 tablespoons of the butter in a medium, heavy-based saucepan over medium heat. Add the flour and whisk until smooth; cook 2 to 3 minutes, whisking frequently. Slowly pour in the milk, whisking vigorously. If the sauce gets lumpy, don't worry; just keep whisking until smooth. Lower the heat and simmer for 7 to 8 minutes, whisking frequently, until creamy and smooth. Add 1-1/2 teaspoons salt, the mustard and nutmeg if using, and the black pepper.
Take the pan off the heat and add 2-1/2 cups of the cheddar and half the parmesan cheese. Whisk until the cheese is melted and the sauce is smooth. Taste and add more seasonings if you like. It should be salted well, as the sauce will flavor the macaroni.
Meanwhile, bring a large pot of water to a boil, add 2 tablespoons salt, and boil the macaroni according to the package directions. Drain well, return to the pot, then toss with the sauce until thoroughly coated. Add the green chiles and pile into a 13 by 9-inch baking dish or four 6-inch cast-iron skillets. Sprinkle evenly with the remaining cheddar and parmesan.
Melt the remaining 2 tablespoons butter and toss with the bread crumbs and smoked paprika; distribute over the macaroni. Bake until the topping is browned and the macaroni is hot, about 20 minutes. Let rest for about 10 minutes before serving.