Preheat oven to 325°F. Cook crumbled sausage in large skillet on medium heat until brown, stirring occasionally. Drain sausage. Spread in lightly greased 11x7-inch baking dish. Sprinkle cheese over sausage.
Beat eggs, water, milk and Gravy Mix in medium bowl with wire whisk until well blended. Pour over cheese. Arrange bread cubes evenly over mixture. Drizzle butter over bread, if desired. Sprinkle with paprika.
Bake, uncovered, 40 minutes or until knife inserted in center comes out clean. Let stand 10 minutes before serving.