Combine the torn bread and milk in a large bowl. Let stand for 5 minutes or until the bread softens. Add the ground chicken, bread crumbs, Parmesan cheese, 2 tablespoons of the parsley and 1/4 teaspoon of the salt; mix well with your hands. With hands kept wet with cold water, shape mixture into 1-1/2-inch balls.
Heat the oil in a large skillet over medium heat. Working in batches if necessary, add meatballs to skillet; cook, turning, until browned on all sides, about 5 minutes. Transfer meatballs to a plate.
In the drippings in the skillet, cook green pepper and onion over medium-high heat until just tender, about 2 minutes. Add the water; continue cooking, stirring occasionally, until the vegetables are very tender, for about another 6 minutes.
Stir in the meatballs, crushed tomatoes and the remaining salt. Bring to boiling. Reduce heat; cover and simmer, stirring occasionally, for 15 minutes or until the meatballs are cooked through.
Meanwhile, prepare the penne or ziti according to the package directions; drain.
Preheat oven to 375°F.
Toss pasta with sauce and meatballs in skillet. Spoon half of mixture into 3-quart oval casserole. Sprinkle with half the Cheddar cheese. Spoon remaining pasta mixture on top. Top with remaining cheese. Tent with aluminum foil (do not let foil touch cheese).
Bake in 375°F oven 35 minutes until hot and bubbly and cheese is melted. Remove foil. Sprinkle with remaining chopped parsley.
