Combine 3/4 cup flour, sugar, undissolved yeast and salt in a large bowl. Heat milk, water, and butter until very warm (120 to 130oF). Gradually add to flour mixture. Beat 2 minutes at medium speed of electric mixer, scraping bowl occasionally. Add egg and 1/2 cup flour; beat 2 minutes at high speed, scraping bowl occasionally. Stir in remaining flour, green pepper, red pepper and cheese to make a stiff batter. Spoon in muffin cups well greased with shortening. Cover; let rise in warm, draft-free place until doubled in size, about 45 minutes.
Bake at 375oF for 15 to 20 minutes or until done. Remove from cups; cool on wire rack.