In a food processor or blender purée roasted peppers until smooth. In a large heavy saucepan cook onion in butter over moderately low heat, stirring, until soft, about 5 minutes. Add garlic and cook, stirring, 2 minutes. Stir in grits and add 2 cups milk in a stream, stirring. Simmer mixture, stirring, until milk is absorbed, about 5 minutes. Stir in remaining 2 cups milk and simmer, stirring occasionally, until milk is absorbed, about 5 minutes. Stir in water and gently simmer (do not cover), stirring occasionally, until grits are soft and thickened, about 35 minutes.