Using 4 cups of milk and 1 teaspoon salt, prepare grits according to package directions. Remove grits from heat and stir in cheese, bacon, green onions, corn and both peppers. Pour into a lightly greased 8-inch square pan. Loosely cover with plastic wrap and chill 4 to 24 hours.
Using your hands, roll grits into 1 1/2-inch balls.
In a bowl, whisk together eggs and 1/4 cup water.
Dip balls in egg mixture and then roll in Panko crumbs to coat.
Pour 2-3 inches of oil in a Dutch oven or deep skillet. Heat oil to 350 degrees.
Fry fritters in batches for 3 to 4 minutes, until golden brown on all sides.
Drain on a paper towel-lined plate. Serve warm.
To make Pepper Jelly Dipping Sauce, combine pepper jelly, mustard and vinegar in a microwave safe bowl. Stir well. Microwave for 20 seconds or until warm.