1. Preheat oven to 375°.
2. Combine first 3 ingredients. Place flour in a shallow bowl or dish. Place breadcrumbs and 1/4 cup cheese in a second shallow bowl or dish. Combine 2 tablespoons water and egg in a third bowl; stir with a whisk.
3. Working with 1 cutlet at a time, dredge cutlets in flour; dip in egg mixture, and dredge in breadcrumb mixture.
4. Heat a large nonstick skillet over medium-high heat. Add 2 1/2 tablespoons oil to pan; swirl to coat. Cook half of cutlets 3 minutes on each side or until golden brown. Remove cutlets from pan; keep warm. Repeat procedure with remaining oil and cutlets.
5. Pour 2/3 cup pasta sauce mixture into bottom of a 3-quart casserole coated with cooking spray. Arrange chicken cutlets in a single layer over sauce mixture; cover with remaining sauce mixture. Top with mozzarella cheese and 1/4 cup Parmesan cheese.
6. Cover and bake at 375° for 20 minutes. Uncover and bake an additional 15 minutes or until cheese melts and top is brown and bubbly around edges. Sprinkle with basil.