When caramelizing onions, one needs space in the pan, so they "fry" more than
"steam" by over crowding.  They get the rich brown taste and become sweet.
 Then the liquid added (broth, wine, sherry, water) deglazes the pan, which
creates a rich broth.  
I see nothing wrong with beef bullion, as it will enrich the broth, but some
purists don't like it, and it takes effort to make stock. Stock can also be
purchased, but I would rather enhance broth with bullion than commercial
stock, fwiw, imho.
The most common cheese used is Gruyere, but some US home cooks/restaurants
also use swiss, provolone, etc.  It needs a rich buttery taste, and that
stringy nature to get the whole feeling of eating an authentic French Onion
Soup.   Otherwise it tends to fall apart in the soup, and the browning of the
cheese under the broiler enriches the flavor, which is that over all browned
taste added to each layer in the onion broth, bread, and cheese.  I have eaten
it all over here and internationally, though rarely make it.
I am of the humble opinion that in the US, we tend to avoid browning because
of burning, that European cooks (or perhaps those of another generation)
embrace/d.  There is an old brown rice recipe, where you take long grained
rice, and brown it in butter until it turns quite dark, then add stock or
water (or perhaps bullion and water if you wish) and cook it as per usual
rice.  It is amazing how wonderful it tastes.  I have learned these things
from European cooks and my stash of gourmet cookbooks over the years.
Whatever it takes to get the job done, and ultimately, to satiate your
palate!
Susan Reishuswho loves really delicious food, and trying not to wear the
evidence!  LOL  

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