Add the milk and stir until the sauce slightly thickens.
Add the cheddar cheese, salt, and cayenne pepper. Continuing stirring until the nacho cheese sauce thickens (10 to 15 minutes).
Add the diced jalapeño pepper and stir to combine. Taste test the nacho cheese. Add more cayenne pepper if you want things spicier.
Remove the nacho cheese from the heat and allow it to cool (and thicken) for 5 minutes. Serve.
The jalapeño pepper is optional (though we don't mark it as such as we love the added pop). Feel free to adjust the cayenne pepper powder used to make up for the lost heat if it's removed from the recipe.