Preheat oven to 400 degrees. Warm the milk in the microwave to room temperature.
Melt 1/4 c. butter in a large saucepan over medium-high heat. Add flour, cook, whisking constantly for 1 minute. Whisk in the milk and 3 c. lukewarm water. Bring to a boil, reduce heat to a simmer and cook, whisking often, for about 10 minutes. Stir in the salt and pepper. Remove the sauce from the heat.
Toss the dry pasta with 1 1/2 c. of the shredded cheese in a 9" x 13" baking dish. Pour the sauce over the pasta and cover with foil. Bake for 20 minutes at 400 degrees.
Meanwhile, melt the remaining 1/4 c. butter in a large skillet over medium heat. Add the panko crumbs to the skillet. Season with salt and pepper.
Remove the foil from the baking dish. Sprinkle the remaining 1/2 c. cheese over the pasta then sprinkle the panko crumb mixture over the top. Bake until the pasta is tender and the top is golden brown, about 10 minutes longer. Let sit 10 minutes before serving.