In a large pot over medium heat, cook the bacon until evenly brown, but not crisp. Mix in the onion, and coat with the bacon drippings. Stir in potatoes, and season with salt and pepper. Mix in the flour and water, stirring until smooth. Cover pot, and cook 10 minutes, until potatoes are tender.
Reduce heat to low. Gradually stir in the milk. Simmer soup 1 hour, stirring frequently to avoid scorching.
