Preheat oven to 425 deg. Spray 3qt. casserole dish w/ cooking spray. Cook & drain macaroni as directed. In lrg. skillet, cook sausage until done, drain. In same skillet, cook bell pepper & onion until tender.
In sauce pan, melt butter over med. heat. Stir in flour, salt & 1/2 tsp. pepper flakes. Cook & stir until smooth. Grad add milk & water, stirring constantly until thickened. Grad add chedder; stir until melted. Add macaroni, sausage & onion mixture, toss to coat. Spoon into casserole. Sprinkle w/ mozz. cheese. Bake uncovered 30 min. Top w/ Parm cheese, pepperoni & remaining 1 tsp. pepper flakes. Bake 2-4 min longer or until lightly browned. Garnish with basil.