Dip veal pieces in egg; dredge in cracker crumbs. Sauté in oil in a large skillet over medium heat until browned. Drain veal on paper towels; set aside.
Melt butter in a heavy saucepan over low heat. Add flour; stir until smooth. Cook 1 minute, stirring constantly. Gradually add milk; cook over medium heat, stirring constantly, until thickened and bubbly. Stir in salt and pepper.
Place veal in a lightly greased 1-quart casserole. Spoon sauce over veal. Bake, uncovered, at 325° for 1 hour or until veal is tender.