In a food processor, combine all peppers and pulse until finely minced. Strain away any liquid and transfer minced peppers to a medium saucepan.
Add sugar, vinegar and salt and simmer on medium heat until syrupy enough to coat the back of a spoon, about 20 to 30 minutes. Remove from the heat and cool.
To Make The Grits
Line a baking sheet with parchment paper and spray with nonstick pan spray.
In a medium saucepan, bring water and cream to a boil over medium-high heat, and season with salt and black pepper.
Whisk in grits, bring to a boil, then reduce heat to a simmer. Continue to simmer, whisking frequently, until the mixture is creamy and the grits have cooked through, 30 to 40 minutes.
Add butter and cheese and stir until butter is melted. Transfer grits to the prepared baking sheet and refrigerate until cooled, at least 4 hours.
To Make The Fritters
In a large Dutch oven or other heavy-bottomed pot, heat 2 inches of oil to 350 degrees over medium-high heat. Alternatively, heat the oil to 350 degrees in a deep fryer following the manufacturer’s directions.
Line a large plate with paper towels. While the oil is heating, form cooled grits into golf ball-shaped balls, flatten the dough, then stuff the center of each ball with shredded cheese.
In a small baking dish, whisk together eggs and water. In a separate baking dish, season bread crumbs with salt and pepper. Roll each ball in egg wash, then completely coat each ball with the seasoned bread crumbs.
Fry in batches until golden brown and cheese has melted in the center, about 5 minutes, and drain on prepared plate.