Preheat the oven to 325. Prepare the spaghetti noodles as directed on the package and drain.
Meanwhile, melt the butter in a skillet and sweat the onion and bell pepper until they are soft. Chop the tomatoes and add them and the liquid from the can to the sauce. Add the mushrooms and black olives and bring to a simmer for five minutes.
Whisk together the cream of mushroom soup and the milk.
Grease a 9"x13" pan. Add half of the spaghetti noodles, half of the sauce, half of the cheese, and half of the mushroom soup. Repeat for a second layer.