Peel and dice potatoes; put in a pan and cover with water. Boil for ten minutes or until easily pierced with a fork. Drain; cool. Fry bacon till crisp and set aside. Add onion to bacon grease, cook to browned. Add vinegar, water, sugar, salt, and pepper to the pan. Bring to a boil, let it simmer for about 3 min. Put the potatoes in a large casserole; pour mixture over them. Crumble in the bacon. Put in the oven on low (Gas Mark 2) for about an hour and serve, or cover with foil and leave on Gas Mark 1 (almost residual heat) until serving.