Preheat oven to 400 degrees F.
In a large bowl combine the milk and bread. Let the bread absorb the milk. Add remaining meatball ingredients except the cheese. Using your hands, gently combine all the ingredients until they are thoroughly mixed. Take about 3 tablespoons of the meat mixture and roll into a ball and press into a patty. Place a mozzarella cube or 1 tablespoon shredded cheese onto the patty and bring up the sides around the cheese and roll between hands to form a ball. Place onto a nonstick baking sheet or a baking sheet sprayed with nonstick cooking spray. Repeat process with remaining meat and cheese. Place the meatballs into the oven and cook for 12 minutes. Remove baking sheet from the oven and set aside.
In a medium pot heat olive oil over medium heat. Add onion, garlic and saute for 3 minutes. Add remaining ingredients and simmer for 10 minutes. Gently stir in the meatballs and any pan drippings from baking sheet and simmer for another 5 minutes.
Cook the spaghetti in a large pot of boiling salted water until al dente, about 8 minutes. Drain and place the pasta on a large serving platter. Place the meatballs over the spaghetti, pour the sauce on top and serve immediately.