In a large bowl, combine ground beef, bread crumbs, parsley, Parmesan, 1/4 teaspoon black pepper, garlic powder and beaten egg. Mix well and form into 12 balls. Store, covered, in refrigerator until needed.
In a large saucepan over medium heat, saute onion and garlic in olive oil until onion is translucent. Stir in tomatoes, salt, sugar and bay leaf. Cover, reduce heat to low, and simmer 90 minutes. Stir in tomato paste, basil, 1/2 teaspoon pepper and meatballs and simmer 30 minutes more. Serve.
My update Note: I was leary of making this without first pre-cooking the meatballs, but this is by far the best spaghetti and meatballs I have ever made. The meatballs ended up a nice brown color, they were not over cooked and I think putting them in before browning allowed some of the meat flavor to seep into the sauce.
#2 Instead of using all ground beef, I opted to use a combination of ground pork and ground beef (12 oz ground beef, 4 oz ground pork) -instead of plain bread crumbs, I used pre-seasoned breadcrumbs, I increased the parmesan cheese to 4 oz. With the sauce, instead of using 2 (28 oz) cans of whole tomatoes, I used 1 (28 oz can) of whole tomatoes, and then two smaller cans (14 oz) of crushed tomatoes. After simmering the sauce, I ran half of it through the blender to make it smoother. I also added a small can of tomato sauce in addition to the tomato paste, plus for added flavour I added 1 tsp italian seasoning, 1/2 tsp basil, and 1 tsp garlic powder.