Bring milk, water, polenta, salt, and pepper to boil in heavy large saucepan over medium heat, whisking constantly. Reduce heat to low and simmer until thick, stirring occasionally, about 20 minutes. Remove from heat.
Meanwhile, cook pancetta in heavy large skillet over medium-high heat until golden brown, about 3 minutes. Using slotted spoon, transfer pancetta to paper towels. Add mushrooms and 2 tablespoons oil to drippings in skillet. Sauté until mushrooms are tender, about 6 minutes. We added a few splashes of white wine her and sauted until it was reduced. Remove mushrooms and reserve. Lower heat to medium, add another couple tablespoons of oil if necessary and add garlic and sauté until fragrant, about one minute. Add kale in handfuls, stirring to coat with oil and wilt. Shake a bit of salt in every few bunches. Once all the kale is in, check for doneness. If it is wilted but still too chewy, cover and steam in its own liquid over a low heat for a few minutes. Check often so as to not overcook – it should be al dente. Then add mushrooms, bacon and broth; simmer until broth is slightly reduced, about 6 minutes. Stir in thyme and lemon peel. Season to taste with salt and pepper.
Whisk butter and Parmesan into polenta and divide among plates. Top with kale mixture.