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1. In a shallow dish combine bread crumbs and half of the cheese. In another shallow dish beat together egg and the water. Cut meat into eight equal-size portions; lightly sprinkle with salt and black pepper. Dip meat pieces into egg mixture, then crumb mixture; press lightly to coat.
2. In a 12-inch skillet heat 1 tablespoon olive oil over medium-high heat. Working in two batches, cook steak about 5 minutes per side, adding more oil as needed. Remove to a serving platter; cover to keep warm. Carefully wipe skillet clean.
3. Meanwhile, for sauce, in a blender or processor combine sweet peppers and the remaining cheese. Process until nearly smooth. Finely chop 1/2 cup of the basil; set aside. Transfer pepper mixture to hot skillet and heat through. Remove from heat. Stir in finely chopped basil. Pour sauce over steaks. Sprinkle with remaining basil.