In a large pot, cook sausage, ground beef, onion, and garlic over medium heat until well browned. Stir in crushed tomatoes, tomato paste, tomato sauce, and water.
Add sugar, 2 teaspoons basil, fennel seeds, Italian seasoning, salt, pepper, and fresh parsley. Simmer, covered, for about 1 1/2 hours, stirring occasionally.
Fill a 9x13 pan with hot tap water and a drizzle of olive oil. Lay uncooked lasagna noodles in pan to soften.
Meanwhile, in a medium bowl, combine ricotta cheese, egg, remaining teaspoon basil and a dash of salt and pepper.
Preheat oven to 375 degrees. Assemble lasagna as follows: Spread about 1/2 cup of sauce in the bottom of a deep 9x13 dish. On top of sauce, layer 4-5 noodles, 1/2 of ricotta mixture, sliced mozzarella, about 2 cups of sauce, and 1/2 cup of Parmesan cheese.
Repeat once. For the last layer, add 4-5 more noodles, followed by remaining sauce, and sliced mozzarella.
Cover with aluminum foil coated with cooking spray and bake for 25-30 minutes. Remove foil and bake an additional 25 minutes. Let stand 10-15 minutes before serving.