Step 1: Bring sherry and ½ cup water to a boil in a 2-quart saucepan. Add scallops, salt and pepper. Poach for 5 to 7 minutes. Remove scallops, to a 2-quart casserole or individual baking dishes, draining and reserving the liquid.
Step 2: Saute onion and garlic in one Tablespoon butter for 3 to 5 minutes. Add mushrooms and parsley and saute an additional 3 minutes. Add remaining cup of water and lemon juice to garlic, onions, mushrooms and parsley, bring to a boil. Drain and set aside.
Step 3: Melt remaining butter. Add the flour stirring constantly and cook for 1 to 2 minutes. With a wire whisk, blend in reserved poaching liquid and cook until sauce thickens. Add vegetable mixture and hot cream. Season to taste if necessary. Pour sauce over scallops. Top with Gruyere and Parmesan cheeses and paprika.
Step 4: Cover and refrigerate or bake immediately in 350 degree oven for 30 - 40 minutes or until golden and bubbly.
4 dinner servings, 6 - 8 appetizer servings.