Bring the cup of water to a boil in a small saucepan over high heat and add the 1 cup of diced red pepper and the chopped spinach. Bring the water back to a boil, turn the heat down to medium and simmer until the pepper is very soft, about 10 minutes. Drain the spinach and red pepper in a colander, pressing out as much liquid as possible.
Combine the cream cheese and milk in the saucepan and cook over medium heat until hot and softened. Stir in the cooked spinach and red peppers, Parmesan cheese, crushed red pepper flakes, salt, and ground black pepper. Continue to stir until well combined and heated through.
Spoon hot dip into a serving dish and serve with the tablespoon of finely diced red bell pepper sprinkled on top for garnish.
