In a soup kettle or Dutch oven, saute onions in butter until tender. Add the potatoes, water, salt and pepper; bring to a boil. Reduce heat; cover and simmer for 15-20 minutes or until potatoes are tender (do not drain). Add shrimp; cook until shrimp turn pink, about 5 minutes.
In a large saucepan over low heat, heat milk. Stir in cheese until melted (do not boil). Add to potato mixture; heat through (do not boil). Stir in parsley.