In a large bowl, combine the first six ingredients. Crumble meat over mixture; mix well. Shape into 1-1/2-in. balls. Place in a greased 15-in. x 10-in. x 1-in. baking pan. Bake, uncovered, at 350 degrees F for 35-40 minutes or until no longer pink.
Meanwhile, in a large saucepan, combine sauce ingredients. Bring to a boil, stirring often. Reduce heat; simmer, uncovered, for 10 minutes. Add meatballs; stir gently to coat.