Preheat oven to 375 degrees F.;
Heat 2 tablespoons oil in a large skillet over medium-high heat. Saute onions until soft and translucent. Set onions aside to cool and wipe skillet clean. In a large mixing bowl combine the cooled onions with remaining meatball ingredients. Form the mixture into 1 1/2-inch balls. Heat remaining oil in skillet over high heat. Brown the meatballs on all sides.;
For the pan sauce:
Set meatballs aside. Add the butter and mushrooms to the pan and saute until lightly browned, about 3 minutes. Add the sherry and chicken stock, to deglaze the pan. Sprinkle in the instant flour and cook until sauce thickens. Add the half-and-half, Worcestershire and bay leaves. Bring to a simmer, whisking often until thickened. Season, to taste, with salt and pepper. Remove pan from heat, add meatballs back to the pan. Bake in the oven for 25 minutes. Discard bay leaves. Serve meatballs with preserves.;
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