Mix beef, pork, breadcrumbs, Parmesan, parsley, egg, garlic, oregano, salt, pepper, and milk in a large bowl until just combined. Shape into 1½-inch balls and place on a tray.
Heat 1 tbsp olive oil in a skillet over medium heat. Brown meatballs in batches for 7–8 minutes, turning to sear all sides. Set aside.
In the same pan, heat remaining oil. Sauté onion for 5 minutes, add garlic for 1 minute, then stir in tomato paste for 2 minutes.
Add crushed tomatoes, tomato sauce, sugar (if using), salt, pepper, red pepper flakes, bay leaf, basil, and oregano. Simmer gently.
Add browned meatballs to the sauce. Cover and simmer on low for 25–30 minutes, stirring occasionally.
Boil salted water. Cook spaghetti per package (9–11 minutes). Reserve ½ cup pasta water, then drain.
Toss pasta with sauce and meatballs or plate separately. Garnish with herbs and Parmesan. Serve warm.