Preheat oven to 350 degrees.

In Dutch oven, melt 3 tbsp butter over medium heat. Cook onion in butter until done. Stir in 3 tbsp flour, 1 tsp salt and 1/4 tsp pepper. Cook, stirring constantly, until smooth and bubbly; remove from heat. Stir in milk. Heat to boiling, stirring constantly. Boil and stir 1 minute.

Mix potatoes and ham in casserole dish; gently press down so surface is even. Pour sauce over potato mixture. Cut remaining 1 tbsp butter into small pieces; sprinkle over potatoes.

Cover and bake 30 minutes. Uncover and bake 1 hour to 1 hour 10 minutes longer, until potatoes are tender. Let stand 5 to 10 minutes before serving (sauce thickens as it stands).