Step 1Cook the potatoes in boiling salted water until tender, about 20 minutes. Drain the potatoes well, then peel and slice them.
Step 2Meanwhile, cook the bacon in a large skillet over medium heat until crisp, about 5 minutes. Drain and crumble the bacon, reserving about 1/4 cup of bacon fat.
Step 3Cook the onions in the reserved fat over medium heat until tender, 10 minutes. Stir in the flour, 2 teaspoons salt, sugar, celery seeds and pepper to taste. Cook 2 minutes. Add the 1 1/2 cups of water and the vinegar, mixing well. Cook, stirring often, until the liquid is bubbly, has thickened and coats the back of a spoon. If the sauce becomes too thick, add a little water or vinegar.
Step 4Stir in the bacon and potatoes. Cook until heated through, tossing gently to mix. If you prefer a more tart salad, add more vinegar while tossing.
Step 5Place the salad in a bowl and let it rest at least an hour. (Or cover and refrigerate it overnight. Bring it to room temperature before serving.)