Preheat oven to 350 F. In large pot place potatoes with enough water to cover. Bring to boiling. Reduce heat, simmer 10 to 12 minutes or just until potatoes are tender but not soft. (Potatoes should be tender on the outside but resistant in center when pierced with tip of pairing knife.) Drain potatoes; cool.
Meanwhile put water, sugars and salt in nonreactive small saucepan. Bring to a boil, stirring just until the sugars are dissolved. Simmer 8 minutes; remove from heat. Stir in lemon juice, grated nutmeg, and 2 Tbsp. butter.
Butter a large shallow glass or ceramic baking dish with remaining butter. Peel potatoes; cut crosswise into 3/4-inch-thick slices. Arrange slices in single layer in baking dish. Pour lemon syrup over. Bake in the preheated oven 40 to 50 minutes, basting occasionally, until potatoes are well-glazed and begin to caramelize on edges. Remove from oven; cool slightly before serving. Serve hot or warm garnished with lemon peel. Makes 6 to 8 servings.