In a large saucepan, bring water and salt to a boil.
Add squash and onion.
Reduce heat; cover and cook until squash is crisp-tender, about 6 minutes.
Drain well; set aside.
In a large bowl, combine the soup, sour cream, stuffing and the contents of seasoning packet, chilies, salt and pepper.
Fold in squash mixture.
Pour into a greased shallow 2-quart baking dish.
Sprinkle with cheese.
Bake, uncovered, at 350° for 25-30 minutes or until heated through.