Preheat the oven to 375°F. Lightly grease a 2-quart casserole dish with a small amount of olive oil.
Heat a large skillet over medium heat and add sausage, zucchini, and onion. Cook about 10 minutes, breaking the sausage up with a spoon, until the zucchini is crisp-tender and the sausage is no longer pink. Drain off any excess drippings.
Add garlic and cook for 1 minute. Stir in tomatoes, spaghetti pieces, water, salt, and pepper. Transfer mixture to prepared casserole dish. Make sure all spaghetti pieces are covered with liquid. Cover dish with foil and bake for 30 minutes, until pasta is al dente. Remove foil and sprinkle Parmesan and mozzarella on top and place under broiler for 1 minute. Watch carefully so the cheese does not burn.
Remove from oven and let stand for 5-10 minutes before serving. When ready to serve, top each serving with basil.