For dressing, in a small saucepan, combine sugar, vinegar, and water; heat and stir until the sugar dissolves.
In a blender container, combine sugar mixture, salad oil, celery seeds, salt, and black pepper; cover and blend until well mixed. Add sour cream; cover and blend just until combined.
In a large bowl, combine shredded cabbage and sweet pepper; add dressing. Toss to combine. Serve immediately. (Or cover and chill in the refrigerator for up to 4 hours. Stir before serving.) Makes 8 to 10 side-dish servings.