Preheat oven to 325 degrees.
Cook grits in 4 cups of salted water until thick. Saute sausage, breaking it into small pieces. When sausage is almost done, add onion to sausage and continue to saute until onions are soft and sausage is cooked through. Drain sausage mixture to remove excess fat.
Add butter, egg, and 1 cup of the cheese to grits. Combine grits mixture with sausage mixture.
Pour into a 13 x 9-inch casserole dish and garnish with the remaining 1/2 cup of cheddar cheese, paprika and parsley.
Bake for 45 minutes to 1 hour, until the casserole is bubbly and lightly brown on top.
The casserole can be refrigerated for up to 2 days before baking, and it also freezes well.