Melt butter in heavy saucepan over low flame. Stir in flour. Add milk, salt, pepper, and nutmeg, stirring constantly until smooth and thickened.
Take pan off fire and stir in yolks one at a time. Add cheese. Mix well. Return pan to fire and, stirring constantly, cook over a low flame for 10 minutes, or until cheese is melted. Let cool slightly.
Beat egg whites until they are stiff, and fold them into cheese mixture. Pour batter into a buttered souffle dish. Bake in oven at 375°F for 30 minutes. Serve immediately.