In a large saucepan, combine sugar, apples, vinegar, green pepper, jalapenos and water. Bring to a boil. Reduce heat; simmer, uncovered, 10 minutes. Strain mixture and return to pan. Stir in food coloring. Bring to a full rolling boil over high heat, stirring constantly. Stir in pectin. Continue to boil 1 minute, stirring constantly.
Remove from heat; skim off foam. Ladle hot mixture into five hot half-pint jars, leaving 1/4-in. headspace. Wipe rims. Center lids on jars; screw on bands until fingertip tight.
Place jars into canner with simmering water, ensuring that they are completely covered with water. Bring to a boil; process for 10 minutes. Remove jars and cool. Serve with cream cheese on crackers.
The processing time listed is for altitudes of 1,000 feet or less. Add 1 minute to the processing time for each 1,000 feet of additional altitude.
Wear disposable gloves when cutting hot peppers; the oils can burn skin. Avoid touching your face.