Walking Chili Cheese Dogs

2 (15-ounce) cans chili with beans (such as Hormel®)

1 (12-oz.) package little smokies sausages, chopped (about 2 cups)

1 cup finely chopped white onion (from 1 medium [8 oz.] onion)

1 (4-ounce) packet processed cheese sauce (such as Velveeta®)

2 cups shredded sharp Cheddar cheese, divided

8 (.75 ounce) Funyun bags, tops trimmed

1/2 cup sour cream

finely chopped scallions and sliced pickled jalapeño chiles, for serving