Boil potatoes, apples, and sugar in 1 inch of water to boiling. Reduce heat, cover and cook until tender, approx. 15 minutes; drain. Fry bacon until crisp; drain on paper towel. Cook onions in rendered bacon fat. Place potatoes and apples in serving bowl, dot with butter, season with salt and pepper, and sprinkle with nutmeg. Finish by topping with bacon and onion.