For the sauce: Heat olive oil in a saucepan and saute onion and garlic until translucent, being careful not to burn. Stir in sliced peppers and gently cook until softened. Stir in tomatoes, fresh basil leaves bundled basil stems, season with salt and pepper and let cook gently to let flavors integrate.
For the kielbasa: Preheat the oven to 350 degrees F.
While the sauce is cooking, heat the oil over medium heat in a large skillet. Cook kielbasa until they begin to brown being careful to keep heat at medium so they don't split. Transfer to a large baking dish with a slotted spoon, reserving the drippings in the skillet to sear the meatballs.
For the meatballs: While the kielbasa are cooking, mix breadcrumbs, milk, onions, eggs, and parsley in a mixing bowl. Add ground beef and mix thoroughly. Form into small meatballs and sear in the pan in which the kielbasa were cooked. Transfer with a slotted spoon to the baking dish with the kielbasa. Pour the sauce over the kielbasa and meatballs, and cover with a lid or foil, and finish in the oven for about 20 minutes.