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Cook macaroni according to package directions. Drain and set aside.
Cut shrimp crosswise into thirds. In a medium frying pan, over medium heat, melt 2 tablespoons butter. Add garlic, and cook until translucent. Stir in the onion and celery, and cook, stirring occasionally, until translucent. Add shrimp, 1 teaspoon salt, chives and pepper. Mix thoroughly, reduce heat and cover. Cook for 10 to 12 minutes until the shrimp are cooked through. Drain and reserve liquid.
In a medium saucepan, melt 2 tablespoons butter over low heat. Stir in cornstarch/water mixture, nutmeg, and remaining 1 teaspoon salt. Gradually stir in half-and-half; cook and stir until mixture thickens slightly and bubbles. Remove from heat. Add half the colby cheese and 1 cup of the cheddar. Stir until melted; then add remaining colby cheese. Continue to stir until mixture is smooth. Add reserved liquid from shrimp and continue to stir until mixture is well combined.
Grease a 2-quart casserole with remaining tablespoon butter. In large bowl combine shrimp and cooked macaroni; add cheese sauce and mix thoroughly. Pour mixture into casserole dish and stir in the egg. Bake 35 to 40 minutes or until lightly browned and bubbly. Remove from the oven and sprinkle with remaining 1 cup of cheddar cheese. Return to the oven and bake until cheese is melted. Remove from oven and sprinkle with paprika. Let stand 10 to 15 minutes before serving.