Bring chicken broth, water, and salt to a boil over high heat. Slowly stir in grits. Reduce heat and simmer 15 minutes, stirring frequently. Stir together grits and 2 cups Cheddar cheese. Set aside.
Melt butter in a skillet over medium heat. Stir in onions and green peppers. Sauté about five minutes or until softened. Stir together grits mixture, onion mixture, shrimp, drained tomatoes, and seafood seasoning.
Pour into the prepared dish. Sprinkle with 1/2 cup Cheddar cheese and crumbled bacon, if desired. Bake 35-45 minutes or until bubbly. Let stand five minutes before serving.