Melt 1/4 cup butter in a Dutch oven over medium-high heat; add chopped onion and next 4 ingredients, and sauté until tender. Remove from oven; set aside.
Melt remaining 1/4 cup butter in Dutch oven over low heat; whisk in flour until smooth. Cook, whisking constantly, 1 minute. Gradually whisk in milk. Cook over medium heat, whisking constantly, until thickened and bubbly.
Stir in onion mixture, salt and next 3 ingredients. Bring to a boil, stirring constantly; reduce heat, and stir in crabmeat. Simmer, stirring often, 5 minutes. Stir in sherry.