1. Place bread in a food processor; pulse 12 times or until coarse crumbs measure 1/2 cup. Combine breadcrumbs, beef, and next 7 ingredients (through egg) in a bowl. Using wet hands, shape mixture into 20 (about 2 tablespoons each) meatballs. Set aside.
2. Heat 1 teaspoon oil in a large Dutch oven over medium heat. Add ham to pan, and cook for 3 minutes or until well browned, stirring frequently. Transfer to a large bowl. Add remaining 1 teaspoon oil to pan. Add meatballs; cook for 5 minutes or until browned, turning often. Add meatballs to ham in bowl. Coat pan with cooking spray. Add onion, bell pepper, and garlic to pan; cook 5 minutes or until tender, stirring often. Add sherry; cook for 3 minutes or until liquid almost evaporates, scraping pan to loosen browned bits. Add tomatoes and meatball mixture; bring to a boil. Cover, reduce heat, and simmer for 30 minutes or until sauce is slightly thickened. Remove from heat, and keep warm.
3. Place 1 cup pasta in each of 4 shallow bowls; top each serving with 5 meatballs, 3/4 cup sauce, and 1 tablespoon shredded Manchego cheese. Garnish with additional parsley, if desired.