Melt 4 tablespoons butter in a large saucepan over medium-high heat. Add flour, whisking constantly, for about 2 minutes. Whisk in milk and 1 1/2 cups water. Bring to a boil, reduce heat to a simmer, and cook, whisking often, until a very thin, glossy sauce forms, about 10 minutes. Stir in the mustard powder, cayenne pepper (if using), salt and pepper. Remove the sauce from the heat. Stir in the remaining 2 1/2 cups of cheddar cheese until smooth.