Place potatoes into a large pot with enough water to cover. Bring to a boil, then cook until potatoes are soft, about 20 minutes. Drain water and place potatoes into a large bowl.
Mash potatoes, leaving them slightly lumpy as if you were making mashed potatoes. Mix in salt, eggs, flour, 2/3 cup bread crumbs, and nutmeg until combined. If dough is too sticky, you can mix in more flour or bread crumbs. Roll dough into walnut-sized balls.
Bring a large pot of lightly salted water to a boil. Gently drop dumplings into the water. When they come up to the surface, let them boil, uncovered, for 3 minutes. Remove dumplings with a slotted spoon and keep warm.
While the dumpling water is coming to a boil, melt butter in a skillet over medium heat. Add onions and 1/4 cup bread crumbs. Cook, stirring constantly, until onions are tender and sauce has thickened some.