1. Preheat oven to 375ºF. Make meatballs: Soak cracker crumbs in milk for 5 minutes. Warm oil in a skillet over medium-high heat. Sauté onion until tender, about 4 minutes. Add garlic; sauté 1 minute longer.
2. Combine cracker and onion mixtures with remaining meatball ingredients; mix thoroughly but do not overwork. Shape into 1 1/4-inch balls.
3. Line a large, rimmed baking sheet with foil. Mist a wire rack with cooking spray; place over sheet. Place meatballs on rack. Bake until browned and an instant-read thermometer inserted into center of a meatball reads 160°F, 20 to 25 minutes.
4. Make sauce: Warm oil in a skillet over medium-high heat. Sauté onion for 3 minutes. Add garlic, Italian seasoning and red pepper; sauté 2 minutes. Add tomato paste; stir for 30 seconds. Pour in wine; stir until evaporated. Add tomatoes. Reduce heat; simmer until thick, about 10 minutes. Season with salt and pepper. Serve with meatballs.