In a 12-inch nonstick skillet over high heat, bring onions, broth, thyme, and bay leaf to a boil. Reduce to medium and simmer until liquid has evaporated about 12-14 minutes.
In a small bowl use a fork to combine cornstarch and 1 tablespoon milk. To the pan add remaining milk, cream, cornstarch mixture, 1 teaspoon salt, and ½ teaspoon pepper. Bring to boil, then reduce heat to medium-low and continue to cook, stirring occasionally, until sauce thickens and onions are tender about 8-10 minutes.
Remove pan from heat and stir in 2 tablespoons chives, lemon juice, and nutmeg. Remove bay leaf and season with salt and pepper to taste. Transfer creamed pearl onions to serving bowl and sprinkle with remaining chives. Serve immediately.