Serve this old-fashioned potluck dish warm.
Scrub the potatoes. In a large saucepan, place potatoes and enough lightly salted water to cover potatoes. Bring to boiling; reduce heat. Simmer, covered, for 20 to 25 minutes or just until tender; drain well. Cool slightly. If you like, peel. Halve and cut potatoes into 1/4-inch slices. Set aside.
In a large skillet, cook onion and bacon over medium heat until bacon is crisp and onion is tender. Stir in sugar, cornstarch, salt, 1/2 teaspoon celery seeds, dry mustard and black pepper; combine well. Stir in water and vinegar. Cook and stir until thickened and bubbly. Gently stir in the potatoes. Cook, stirring gently, for 1 to 2 minutes more or until heated through.
Transfer to a serving bowl and serve warm. If you like, sprinkle with additional celery seeds. Makes 6 side-dish servings.