In a 4-quart Dutch oven combine potatoes, chopped sweet peppers, half-and-half, salt, curry powder, cayenne pepper, and 1/2 cup of the water. Bring to just boiling. Reduce heat. Simmer, covered, over medium heat for 10 minutes or until potatoes are tender, stirring occasionally. Cool slightly.
Carefully transfer about half of the soup mixture to a blender; add the remaining 1/2 cup water and blend until nearly smooth. Return to Dutch oven; stir to combine. Cook and stir over low heat until heated through. Stir in cheese until melted.
Top servings with sliced sweet peppers and parsley.