Heat the oil in a very large pot over medium heat. Add the onion, green pepper, mushrooms and garlic and cook 5 minutes. Stir in remaining sauce ingredients. Bring to a gentle simmer, loosely cover and cook, stirring occasionally, 30-40 minutes.
While this occurs, preheat oven to 400 degrees F. Combine meatball ingredients in a bowl. Roll into 1 to 2-inch balls, and then place on a baking sheet. Bake until cooked through, about 20-25 minutes. Drain the meatballs, then add to the sauce and cook 20 minutes more. Serve over pasta, or use to make saucy meatball sandwiches.