Soak plums and raisins in hot water for 20 minutes. Peel onion and finely chop. Mix onion with egg and Matzo meal. Season with salt and pepper. Rinse bell peppers, cut off tops and remove seeds. Peel onions and cut into quarters.
Fill peppers with meat mixture. Add stuffed peppers to a shallow pan with plums, whole and unpeeled shallots, garlic cloves, onions, butter flakes and water. Sprinkle with salt, sugar and nutmeg to taste. Cover and boil over low heat for about 1 hour.
Add more water as needed. When dish is almost ready, remove lid and let mixture thicken. Do not serve before thickening. Serve stuffed peppers with vegetables.