Step 1Heat the oven to 400 degrees. Place the onions and butter in large lidded casserole, season with one-fourth teaspoon salt, cover and place in the oven. Cook, stirring every 15 minutes or so, until the onions are softened and a light golden-brown, about 1 1/2 hours.
Step 2Transfer the casserole to the stove-top and heat over medium-high heat. Continue to cook, stirring frequently, until the onions are a deep golden-brown and just begin to stick to the bottom of the pot to form a crust.
Step 3Add half of the water and cook, scraping the bottom constantly, until the water has evaporated, about 8 minutes. Add the Sherry and continue cooking until it has evaporated, 3 to 5 minutes.
Step 4Stir in the remaining water, chicken broth and beef broth, as well as the thyme bundle and bring to a gentle simmer. Reduce the heat to maintain a bare simmer and continue to cook for 40 minutes. Remove the thyme and season to taste with salt and pepper.
Step 5While the soup is simmering, prepare the toasts: Slice the French bread on a bias into one-half-inch thick slices large enough to fit inside of each soup bowl (use one toast if it will fit, two if the slices are smaller). Toast the bread until crisp and golden. Set aside.
Step 6Fill 8 oven-proof soup bowls with soup to one-half inch from the rim, making sure to distribute onions evenly between bowls. Lay the toasts on top of the soup, inside the edges of the bowl. Sprinkle the grated Gruyere evenly over the tops of the bowls and place the bowls under the broiler just until the cheese is bubbling and begins to brown in places. Serve immediately.