Wash and cut BABY potatoes in half. Microwave in a steamer, depending on steamer: on HIGH 7-10 minutes or until tender OR boil in saucepan until tender, drain water.
While potatoes cook, heat oil in a saucepan over medium-high heat. Add onion; sauté 3 minutes. Add broth. Combine flour and 1/2 cup milk; add to pan with 1 1/2 cups milk. Bring to a boil; stir often. Cook 1 minute. Remove from heat; stir in sour cream, Italian seasoning, salt, and pepper. Put pan back on heat, ADD potatoes and let simmer for 10-20 min. Mash potatoes into soup with potato masher, until desired consistency.
Arrange bacon on a paper towel on a microwave-safe plate. Cover with a paper towel; microwave on HIGH for 4 minutes. OR cook on stove top until desired doneness. Crumble bacon.
Ladle into bowls, top with cheese, green onions, and bacon.