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In a large pot over medium-high heat, bring shallot, garlic, cream, milk, and peppercorns to a simmer. Remove from heat, cover, and let steep 30 minutes.
Meanwhile, arrange a rack in center of oven; preheat to 350°. Grease a 13" x 9" baking dish with butter. Slice potatoes into ⅛"-thick slices (a small handheld mandoline works well for this).
Strain cream mixture through a fine-mesh sieve into a large bowl, then return to pot; discard solids. Stir in salt, then add potatoes. Cook over medium-high heat until simmering. Reduce heat to medium-low and continue to simmer until potatoes are just tender, 3 to 4 minutes.
Pour half of potatoes and cream into prepared dish; top with half of cheese. Top with remaining potatoes and cream, then top with remaining cheese.
Bake scalloped potatoes until golden brown on top, 40 to 50 minutes. Sprinkle with chives.