Preheat oven to 350 degrees.
In a large skillet, brown ground beef with onion and green peppers, and drain.
Mix ground beef, pasta, and spaghetti sauce in large bowl.
Place half of the spaghetti in a greased 13 x 9 baking dish.
Cover with 1 1/4 cup of cheddar cheese.
Repeat layers.
In a small bowl, combine the mushroom soup and water, and mix until smooth.
Cover the top with the soup.
Sprinkle with Parmesan cheese and bake, uncovered, for 30 minutes or until the dish is heated completely through.