Preheat oven to 350
Combine milk, water, and salt in large saucepan; bring to a boil, stirring constantly to prevent milk from scorching. Stir in grits
Cover, reduce heat and simmer for 15 minutes, stirring occasionally. Add cheddar cheese, gouda, and butter. Stir until cheese and butter melt.
In a small bowl, beat eggs with a fork. Into eggs gradually stir in a small amount of hot grits mixture, then stir this back into saucepan. Pour into lightly greased 2 quart baking dish. Sprinkle with paprika. Bake uncovered for 40-45 min.