Cover beans with water and bring to a boil. After 10 minutes, turn off heat and let them soak for an hour.
Preheat oven to 300°F.
Peel the onion, but do not cut it. Place it in the bottom of a 3-quart casserole dish. Add half the bacon, then the beans, then rest of the bacon.
Mix the sugar, molasses, mustard, salt and pepper, and pour this mixture over the beans. Add water to cover. Resist the urge to stir it; you want this to bake undisturbed. Cover the casserole and bake for about 6 hours, keeping an eye on the liquid level from time to time. Just keep them moist, not submerged.