In a small saucepan, bring 1/2 cup water to boiling. Add bulgur; reduce heat. Cover and cook over low heat about 7 minutes or until bulgur is almost tender and all of the liquid has been absorbed. Set aside.
Meanwhile, for the sauce, spray an unheated 3-quart saucepan with cooking spray. Preheat saucepan over medium heat. Add mushrooms, the 1/2 cup onion, the sweet pepper, and garlic. Cook and stir about 3 minutes or until the onion is tender. Stir in undrained tomatoes, sugar, Italian seasoning, and salt. Bring to boiling; reduce heat. Cover and simmer for 20 minutes. Combine 3 tablespoons water and the cornstarch. Add to sauce; cook and stir until thickened and bubbly. Cook and stir for 2 minutes more. Keep warm over very low heat.
In a medium bowl stir together egg white, bread crumbs, the 2 tablespoons onion, fennel seed, and the salt. Add the beef and softened bulgur; mix well. Shape into 24 balls. Place meatballs in a shallow baking pan.
Bake meatballs in a 375 degree F oven 15 minutes or until juices run clear. Drain meatballs on paper towels. Add meatballs to sauce. Heat through.
Meanwhile, cook pasta according to package directions. Drain well. Serve meatballs and sauce over hot pasta. If desired, sprinkle with Parmesan cheese and basil. Makes 4 servings.