Combine all ingredients except the water and cornstarch and cook in a heavy, covered casserole in a 325° F oven for 1 hour 15 minutes.
Transfer the chicken, bacon, and vegetables to a platter; keep warm.
Pour the sauce into a small saucepan. Combine the water and cornstarch; stir into the sauce. Heat to boiling, stirring constantly, until the sauce thickens, about 5 minutes.