ADD the olive oil to the mushrooms and stir to coat. SAUTE the mushrooms and onions for about a minute. ADD the garlic and cook for another minute. STIR IN the tomato paste, cook for a minute longer. RESERVE 1 cup of the tomato sauce (it will go in the bottom of the casserole dish), and POUR the remaining cup of tomato sauce into the mushrooms along with the crushed tomatoes, and one cup of water. STIR IN the thyme, sugar, dried basil and red pepper flakes. Bring to a simmer, then lower the heat and continue to SIMMER for 20 minutes.