Preheat oven to 350 degrees and grease an 9x13 casserole dish.
Cook pasta in salted boiling water until al dente, about 3 min less than cooking time on box. Drain, reserving 1/2 C pasta water, and set aside. Do not rinse.
In a large saucepan melt butter over low heat. Add minced jalepenos and saute until start to soften about 2 minutes. Whisk in flour and stir until a paste forms, then cook 2 minutes stirring constantly over low heat to cook the flour. Increase heat to medium and add the milk slowly, whisking and cooking until starts to thicken, forming a beschmel sauce, about 3-4 minutes.
Once thickened add the dry mustard, hot sauce, nutmeg, and garlic powder. Turn heat to low and add Velveta cheese, pepper jack cheese and 1 C of the cheddar cheese. Stir until cheeses are completely melted. If it appears too thick, add a small amount of pasta water to loosen it up. Add 1 Tsp salt, then taste and add more salt as necessary.
In a large pot or bowl, pour cheese sauce over noodles stirring with a spatula to coat the noodles, adding enough sauce so that the pasta noodles are quite wet and covered in sauce. (They will absorb sauce as they cook in the oven so you want them to be quite wet at this stage). Pour into greased casserole dish and smooth the top. Sprinkle remaining 1 C cheddar cheese over the top. Bake 20-25 minutes until bubbling and cheese starts to brown. Rest at least 15 minute before serving.
Enjoy!