Heat oven to 325 degrees F. In a large bowl, combine meatloaf mix, onion, bread crumbs, garlic, parsley, Parmesan and egg. Mix until ingredients are evenly blended. Form about 1 tablespoon meat mixture around a piece of string cheese. Shape into a ball. Repeat with remaining mixture and cheese, for a total of 40 meatballs.
Heat oil in a large nonstick skillet over medium to medium-high heat. Brown meatballs in two batches, 3 minutes per batch, turning once. Transfer to a rimmed baking sheet. Remove skillet from heat. Bake meatballs at 325 degrees F. for 17 minutes. Keep warm.
Meanwhile, bring a large pot of water to boiling. Add spaghetti and cook 12 minutes, according to package directions. Drain and transfer to platter.
While pasta boils, return skillet to medium heat. Add sliced garlic and cook 1 minute. Add crushed tomatoes, diced tomatoes, tomato paste, sugar, salt and pepper. Simmer on medium-low, stirring occasionally, 15 minutes. Remove from heat and stir in basil and meatballs.
To serve, transfer spaghetti to a platter or individual bowls and top with meatballs and sauce.