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Add the red onion to the pan and cook until translucent, approximately 5 to 6 minutes. Add the vinegar, chicken broth, mustard, sugar, salt, and pepper to the pan and stir to combine. Add the bacon back to the pan along with the rice and cook, stirring occasionally, until the liquid is absorbed, approximately 7 to 10 minutes. Stir in the dill. Allow to cool slightly before serving.
Place the rice into an 8-inch square glass baking dish.
Bring the water, butter, and salt just to a boil in a kettle or covered saucepan. Once the water boils, pour it over the rice, stir to combine, and cover the dish tightly with heavy-duty aluminum foil. Bake on the middle rack of the oven for 1 hour.
After 1 hour, remove cover and fluff the rice with a fork. Serve immediately.