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PREHEAT oven to 375°F. Mix water, 2/3 cup sugar, tapioca, cinnamon and nutmeg in large saucepan. Stir in apples. Bring to full boil on medium heat, stirring constantly. Pour into 8-inch square baking dish. Sprinkle with 1/2 cup of the cheese.
MIX flour, 2 Tbsp. sugar, baking powder and salt in large bowl. Cut in butter until mixture resembles coarse crumbs. Stir in remaining 1/2 cup cheese and milk until mixture forms soft dough. Drop by 1/4 cupfuls onto hot apple mixture.
BAKE 25 minutes or until biscuits are golden brown.