In a large saucepan, bring water and salt to a boil. Slowly stir in grits. Reduce heat and cook 4-5 minutes, stirring occasionally.
Remove grits from heat and add a small amount of hot grits into the eggs; add grits/egg mixture back into the saucepan. Stir in sausage, 1 cup cheese, milk and butter; stir until butter is melted.
Pour into a greased 13X9X2-baking pan. Sprinkle with remaining cheese. Bake at 350 degrees F for 50-55 minutes or until the top begins to brown.