To Make The Polenta: Combine milk, 3 cups of water, and salt in a medium saucepan over medium-high heat and bring to a simmer. When it simmers, slowly pour in the polenta and whisk to combine. Partially cover with a lid, reduce heat to low, and cook, whisking vigorously (get all the corners of the pan!) every 5 minutes, until polenta is no longer gritty and looks like creamy oatmeal or loose applesauce, about 30 minutes total
Turn off the heat and let the polenta sit off to the side, covered, for anywhere from 10 to 15 minutes. Meanwhile, make the peppers and mushrooms.
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