In a separate saucepan, melt butter. Add the flour, then blend it in thoroughly.
Add salt to taste, a pinch of nutmeg, and cayenne pepper. Let simmer for 2 minutes.
Mix the cream and milk together, add to the flour mixture and heat gently, mixing constantly. When smooth, add Sherry.
Add this cream sauce to the simmering chowder. Bring to a quick boil, stirring well.
Serve with chunks of French Bread.