Preheat oven to 350 degrees F. Lightly grease a 3-quart casserole; set aside. Cook pasta according to package directions; drain.
Meanwhile, in a 4-quart Dutch oven cook sausage, mushrooms, onion, and garlic over medium-high heat until sausage is browned and vegetables are tender, using a wooden spoon to break up meat as it cooks. Drain off fat. Stir in cooked pasta, tomatoes, tomato paste, the water, and crushed red pepper. Transfer pasta mixture to the prepared casserole.
Bake, covered, for 20 minutes. Sprinkle with mozzarella cheese and Parmesan cheese. Bake, uncovered, about 10 minutes more or until heated through. If desired, garnish with fresh oregano.