Preheat the oven to 350°F (175°C). Grease a 9-by-13-inch baking dish.
Spread the bread cubes evenly across the bottom of the prepared dish.
Cook the breakfast sausage in a skillet over medium heat for 7–10 minutes, breaking it into crumbles.
Add the diced onion and cook for another 3–4 minutes, until softened. Drain excess grease and allow the mixture to cool slightly.
Spread the cooked sausage and onion over the bread. Sprinkle with 1½ cups of cheddar cheese.
Whisk the eggs, milk, Dijon mustard, garlic powder, salt, and black pepper in a large bowl.
Pour the egg mixture evenly over the bread, sausage, and cheese. Gently press down any dry bread pieces.
For a make-ahead casserole, cover and refrigerate for at least 4 hours or overnight. Otherwise, let it rest for 15–20 minutes before baking.
Bake for approximately 40–50 minutes if unchilled, or about 50–60 minutes if cold from the refrigerator. Cover loosely with foil if the top browns too quickly.
During the last 5–10 minutes, sprinkle the remaining ½ cup of cheese over the top if desired.
Bake until the center is set and reaches 160°F (71°C).
Rest for 5–10 minutes before slicing into eight servings. Serve warm.