1. Bring a pan of water to a boil, and drop in the pearl onions. Let them boil rapidly for 2-3 minutes, then plunge them into cold water, and peel them. Cut the mushrooms in half or quarter if large, they should match the size. Sliced the bacon into 1/2-inch pieces, and tie together the herbs for the bouquet garni.
2. Melt butter in a large skillet and fry the onions over a high heat, stirring frequently and shaking the pan, until they are golden-brown. Remove onto a plate. Add the remaining butter to the skillet and sauté the mushrooms for 5 minutes. Remove and set aside with the onions. Fry the bacon over medium heat until crisp. Using a slotted spoon, transfer bacon to paper towels to drain. Reserve.
3. Season the chicken with salt and pepper. Spread the flour on a plate and roll the chicken pieces in it, shaking off excess. In the hot bacon fat, brown the chicken in batches in a single layer, turning to brown evenly.
4. Remove pan from heat, pour in cognac, put pan back on the flame and boil, stirring, for 30 secondes to deglaze the pan. Slowly add the wine and broth, stirring constantly and bring to a boil. Add the bouquet garni, garlic, salt, pepper, nutmeg and sugar. Return to a boil for 1 minute.
5. Cover the pot and continue to cook over low heat for 1 hour, stirring from time to time.
6. Add the reserved mushrooms, bacon and onions and cook for 30 minutes longer.
7. Remove the chicken pieces from the pot and arrange on a serving platter. Remove the bouquet garni. If the sauce needs thickening, bring the sauce to a boil. Mix together 1 tablespoon of softened butter and 1 tablespoon of flour and whisk into the sauce. Boil, stirring, for 2 minutes until thickened.
8. Pour over the chicken and serve immediately, accompanied by croutons or serve with egg noodles. Sprinkle with the chopped parsley.
This dish may be prepared 1 or 2 days in advance and then reheated slowly just before serving