Combine bread and milk in small bowl. Let soak 10 minutes. Squeeze bread to release excess milk; discard milk.
Place beef, pork and next 6 ingredients in large bowl. Add soaked bread and mix thoroughly. Using moistened hands, shape mixture into meatballs, using about 1/3 cup for each.
Heat oil in heavy large pot over high heat. Working in batches, add meatballs to pot and brown on all sides, turning often, about 6 minutes per batch. Transfer cooked meatballs to bowl.
Pour off all but 4 tablespoons fat from pot. Add pasta sauce, water and meatballs. Simmer over medium heat until meatballs are tender and sauce thickens to desired consistency, stirring occasionally, about 1 hour.
