Cook macaroni according to package directions. Meanwhile, in a large saucepan, melt butter. Stir in flour until smooth. Gradually stir in milk. Bring to a boil; cook and stir for 2 minutes or until thickened. Reduce heat; stir in lime juice. Stir in 1-1/2 cups cheddar cheese and 1 cup pepper Jack cheese until melted.
Remove from the heat. Stir in the jalapeno, chili powder and salt. Drain macaroni; add to cheese sauce and toss to coat.
Transfer to a greased 8-in. square baking dish. Top with remaining cheeses; sprinkle with paprika. Bake, uncovered, at 350° for 15-20 minutes or until cheese is melted.
Wear disposable gloves when cutting hot peppers; the oils can burn skin. Avoid touching your face.