Place bacon in a large, deep skillet and cook over medium-high heat, turning occasionally, until evenly browned, about 10 minutes. Drain on paper towels and crumble when cool.
Cover potatoes with water in a large saucepan and bring to a boil over medium heat until tender but not mushy, about 15 minutes; drain.
Melt butter in a large pot over medium heat and stir in flour; mix until smooth. Reduce heat to medium-low and slowly whisk in half-and-half until smooth. Bring to a simmer, whisking constantly, and cook until slightly thickened, 2 to 3 minutes.
Stir in processed cheese cubes until melted and smooth.
Season with white pepper, garlic powder, and hot pepper sauce.
Mix in cooked potatoes, cover, and simmer until potatoes are very tender and soup is thickened, about 30 minutes; stir occasionally.
Ladle soup into bowls and top each bowl with equal amounts shredded Cheddar cheese, crumbled bacon, chives, and parsley.
