In a large saucepan, bring the water and milk to a boil. Whisk in the grits in a slow, steady stream. Add a generous pinch of salt and cook over moderately low heat, whisking frequently, until the grits are thickened and tender, about 30 minutes.

Remove the saucepan from the heat and whisk both cheddar cheeses into the grits along with the cream cheese, pimentos or piquillo peppers and cayenne; season with salt and black pepper. Scrape the grits into a serving bowl, garnish with thinly sliced scallions and serve.