Preheat oven to 350 degrees. Peel potatoes and cut into 1-inch chunks. Place potato chunks in a large saucepan, and add enough cold water to cover by about 2 inches. Bring to a boil over medium-high heat, and reduce to a simmer. Cook until tender, about 20 minutes. You want to be able to poke it with a fork easily. Drain, return to pan, cover, and set aside.
Heat a large skillet over medium heat. Add bacon, and cook until crisp and browned, turning once. Transfer to paper towels to drain; let cool, and crumble into small pieces.
Mash the potatoes in pan until light and fluffy. Add the cream cheese, butter, and sour cream, and stir until combined and smooth. Add the chives, 2 cups cheddar cheese, half the bacon, salt, and pepper. Stir until well combined.
Transfer to a buttered 3-quart baking dish. Top with remaining 1/2 cup cheddar cheese. Bake until top is slightly golden and potatoes are heated through, about 30 minutes. Remove from oven; garnish with remaining bacon. Serve immediately.