Heat 2 tablespoons of oil in a large saucepot over medium heat. Cook the sausage, breaking it up into small pieces, until browned and caramelized, 8 to 10 minutes. Remove the sausage to a paper towel-lined plate and reserve for the filling.
Add the remaining 2 tablespoons of oil to the pot and cook the onion until softened and translucent. Add the garlic and cook for 1 minute. Stir in the tomato paste and cook for 1 minute (the tomato paste will turn a deep maroon color). Add the crushed tomatoes, sugar, bay leaves, 1 1/2 teaspoons salt and a pinch of black pepper. Bring to a simmer, reduce the heat to low and cook for 30 minutes. Melt the butter into the sauce, remove the bay leaves and stir in 1/3 cup of basil. Remove the sauce from the heat and allow to cool to room temperature, 40 minutes.
For the filling: mix together the ricotta, reserved sausage, the remaining 1/3 cup basil, 1 1/2 cups mozzarella, 1 1/2 cups Parmesan, 1 teaspoon salt and pepper to taste. Fold in 1 cup of the cooled tomato sauce. Place the filling in a large piping bag and refrigerate for 30 minutes.
Preheat the oven to 375 degrees F.
Bring a large pot of salted water to a boil. Cook the manicotti shells until they have softened slightly but still hold their tubular shape, 5 minutes.
Pour half of the tomato sauce into a broiler-proof 9-by-13-inch baking dish. Fill each shell with the ricotta mixture. Place the filled shells in the baking dish. Pipe any extra filling along the ends of the shells in the dish. Top with the remaining tomato sauce and sprinkle the remaining 1 1/2 cups mozzarella and 1 cup Parmesan over the top. Cover the baking dish with foil and bake until the sauce begins to bubble, 40 minutes. Remove the dish from the oven, remove the foil and increase the oven to 425 degrees F. Put the manicotti back into the oven to bake until the cheese is browned and bubbling, about 10 minutes. Let cool slightly before serving.
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