Step 1: In a medium saucepan, melt butter over medium-low heat. If using, add diced onion and cook until softened, about 3-5 minutes. Add minced garlic and cook for another minute until fragrant.
Step 2: Pour in the milk (or half-and-half) and heavy cream (if using). Bring the mixture to a gentle simmer, but do not boil. Reduce heat to low.
Step 3: Begin adding the white American cheese in small batches, stirring constantly with a whisk or rubber spatula until each addition is fully melted and smooth before adding more. This slow, gradual process is key to preventing a lumpy dip.
Step 4: Once all the cheese is melted and the dip is smooth and creamy, stir in the diced green chiles (with their liquid), onion powder, garlic powder, and optional cayenne pepper. Mix well to combine.
Step 5: Taste the dip and add salt as needed. If the dip is too thick, you can add a tablespoon or two of milk until desired consistency is reached.
Step 6: Serve immediately with tortilla chips, fresh jalapeño slices, and chopped cilantro for garnish. Keep warm over very low heat if serving for a longer period.