Bring water to boil in medium saucepan on medium-high heat. Gradually add grits, stirring constantly until blended. Cook on low heat 5 min., stirring occasionally.
Remove from heat.
Add 1/2 cup cheddar, VELVEETA, butter, garlic powder and red pepper; stir until cheeses are melted. Set aside. Beat eggs lightly in small bowl.
Add small amount of hot grits mixture to eggs; mix well. Gradually add egg mixture to remaining hot grits mixture, stirring constantly until blended.
Pour into 8-inch square baking dish sprayed with cooking spray.