MELT butter in large saucepan on medium heat. Add onions; cook and stir 5 min. or until onions are tender. Add flour; cook 1 min. or until bubbly, stirring constantly.
STIR in milk. Bring to boil. Reduce heat to medium-low; simmer 1 min.
ADD remaining ingredients. Cook until Velveeta is melted and soup is heated through, stirring occasionally.