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Chile is such a regional and personal thing! I normally cook more Mexican than Southwestern but I really love it all. The following comes from The Feast of Santa Fe, an excellent book on New Mexican cooking.

A customer from New Mexico writes: "I'm a native New Mexican with generations of cooks in my background. For the most part the recipes in Feast of Santa Fe are excellent. However, we never, ever put flour in chile colorado. If the sauce is thin, add more chile. Also chili is from the Indian sub-continent, chile is the new world food." Sounds good to me. The flour thing has always made me uneasy anyway. I think Chili is a losing battle. From what I can tell, stateside, chiles are the vegetable and chili is the dish/stew. But do as you like, just keep eating!

Basic Red Chile Sauce

taken from the book The Feast of Santa Fe by Huntley Dent (1993 Fireside Books)

For about 2 cups:
2 tablespoons vegetable oil
3 to 4 tablespoons onion, finely chopped
1 clove garlic, peeled and finely chopped ¼ teaspoon oregano
1 teaspoon whole or powdered cumin
2 tablespoons flour
½ cup powdered red chilies
2½ cups water
½ to 1 teaspoon salt

Heat the oil over medium heat in a 1- or 2-quart saucepan. Add the onion and garlic and sauté gently for about 5 minutes, or until the onion is wilted, translucent and turning yellow. Stir in the oregano, cumin and flour and cook, stirring constantly, until this mixture (which is like a roux) bubbles up and begins to turn a very light brown, about 3 minutes. Remove pan from heat.

In a separate bowl, mix the powdered chilies and water until they are
smoothly blended. Pour them into the flour-onion paste, stirring to prevent lumps-a wire whisk helps here. Return the pan to medium heat and bring the sauce to the boiling point. Stir from time to time until you begin to see bubbles. (Since red chilies scorch quite easily, how much you have to stir this sauce depends on the quality of your cookware. Stir constantly and watch carefully the first time out.) When the sauce just begins to show signs of active boiling, reduce heat to low and simmer, covered, for 2 to 3 minutes more. Make sure to stir a few times, reaching thoroughly around the bottom and sides of the pan to catch any lumps beginning to form. When the sauce is thickened, smooth and no longer raw-tasting, add the salt, beginning with the smaller amount. Remove from heat and set aside until needed.

Your finished red chili should be thick enough to nap a spoon heavily; it should have a deep, pungent taste of chili without unpleasant musti­ness (a sign of tired chilies) or unpalatable hotness. If it is too bitter or crude for your taste, try other brands of powdered chilies. However, this sauce should not be expected to stand alone. Even if somewhat bitter or sweet, the real test for chile colorado is to marry it with tortillas, so plan as soon as possible to make a batch of enchiladas with your sauce. You are likely to be surprised, or even amazed, by how much better your red chili is than those served in restaurants.

For a smoother sauce, or if the sauce appears too grainy (a function of the coarseness of the ground chilies), puree the sauce, one cup at a time, in an electric blender. A grainy texture, however, is acceptable and proves that you didn't open a can.

Red chili mellows as it stands and keeps well for a week or more in the refrigerator. Plastic wrap can be pressed directly against the surface to prevent a skin from forming, but this is not mandatory since the skin can be stirred back into the sauce when you reheat it. Be sure to cover the container tightly, though, since the red chili smell permeates other foods nearby. Also, make sure your cooking utensils and storage con­tainers are made of impermeable glass or metal-red chili is notorious for stains. To remove any that slip by you, see the note on p. 69.

VARIATIONS:

Hot Red Chili Sauce: The basic recipe produces a lingering heat at the back of the mouth but not much on the tongue. If you want a hotter sauce, taste it after it thickens, then incorporate cayenne or ground hot chilies (such as tepins pequins or Japanese chilies) to taste. If you attempt to add these in powdered form directly to your sauce, it is likely that lumps will form, so first dissolve them in a few tablespoons of water. In fact, if you are cooking an entire New Mexico dinner, it is good to have a teacup by your side
hot red chilies. The concoction can be stirred into any sauce or meat dish that needs added hotness as you go along. Traditionally, New Mexicans of the Santa Fe area were said to like their red chili as hot as possible; a taste for milder stuff develops as you go south to the part of the state under Anglo influence.

Red Chili Sauce with Tomatoes: This mild, faintly sweet version is frankly preferred by most non-Hispanic diners. It is the one many restaurants set out as a matter of course, often considerably thinned if it is to be used as a dipping sauce for tostado chips. Add ½ cup tomato puree (or 4 to 5 canned tomatoes reduced to a puree in a blender) to the basic sauce at the same time as the chilies and water go in. For a thinner sauce, suitable for the table as well as for cooking, use 1 to 1½ cups tomato juice instead of tomato puree.

Sweet-and-Sour Red Chili Sauce: Although its taste is not appropriate for every dish (it does not go well with enchiladas, for example), the
sweet-and-sour tang of this variation makes the basic sauce useful as a table salsa to spoon over grilled meat and poultry. In fact, you can also marinate and baste the meat with it quite effectively. Add 2 or 3
table­spoons white or cider vinegar and 1 tablespoon sugar to the basic sauce after it comes to a simmer. You can also add ½ cup tomato puree, as in the preceding variation, if you like a tomatoey sauce. Adding larger amounts of vinegar and sugar is a fairly common practice among some cooks, but I think it changes the red chili so much that in effect it be­comes barbecue sauce, albeit a good one.

Red Chili Sauce with Broth: In the more refined styles of Mexican cooking, the liquid used in salsa de chile rojo is beef or chicken broth instead of water. Thus refined, the chili can go on the table to serve with roast turkey or capon on feast days. It also makes a good braising liquid for pork shoulder, but watch carefully for scorching, adding extra water to the braising pan as needed. Any red chili used for pot-roasting cuts of beef or pork (such dishes are called carne adovada in New Mexico) needs to be thoroughly degreased before bringing it to the table.

Red Chili Sauce with Cream: This might seem like putting chiffon on a
cactus, but it is frequently suggested in Mexican cookbooks that you add ½ cup heavy cream to the finished red chili sauce for added richness. After being civilized in this way, the sauce can be used for "Swiss" enchiladas and soft tacos, or over a festive roast chicken as a table sauce. I have liked it served over tamales, which are inherently rich to begin with, but this variation is pretty foreign to the austere spirit of most New Mexican
cooking.