In a large bowl, combine the veal, pork, half of the onions, 1 cup panko, the cheese and sage. Season with 1 teaspoon each salt, black pepper, and crushed red pepper. Divide the mixture and form 12 meatballs; refrigerate on a baking sheet.
In a medium saucepan, heat the olive oil over medium heat. Stir in the garlic and the remaining onions and cook, stirring, for 5 minutes. Add the tomatoes and basil; season with salt, black pepper and crushed red pepper. Bring to a boil, then lower the heat and simmer for 10 minutes; keep warm.
In a large pot, heat 2 inches of vegetable oil until it registers 350 degrees on a deep-fry thermometer. In a bowl, beat the eggs with 1/4 cup water. Place the remaining panko in a bowl. Coat the meatballs in the egg, then in the panko. Working in 4 batches and allowing the oil to return to 350 degrees between batches, fry the meatballs until crisp, about 5 minutes. Serve with the tomato sauce.