Bring 4 quarts lightly salted water to a rolling boil in a large pot. Cook macaroni until just tender, about 8 minutes. Drain macaroni in a colander, rinse with cold water to cool, and drain well. Preheat oven to 400 degrees.
Meanwhile, prepare sauce: Heat olive oil in large sauté pan. Add onion, garlic and peppers, and cook over medium heat until vegetables are soft and aromatic, but not brown, about 4 minutes. Stir in flour and cook for 1 minute more.
Stir in milk and bring to a boil, stirring steadily. Simmer sauce until thickened, about 1 minute. Stir in cheese, dill, mustard, salt and pepper, and cayenne and nutmeg to taste. Sauce should be highly seasoned.
Stir macaroni into sauce. Spoon mixture into a 9- by 13-inch (or slightly smaller) baking dish that you've slightly sprayed with oil. Sprinkle top with bread crumbs. Bake until bubbling and golden brown, 30 to 40 minutes.