Bring a large saucepan of lightly salted water to a boil. Add spaghetti and cook for 8 to 10 minutes or until al dente. Drain and set aside.
In a large frypan over medium-high heat saute the onions, capsicums and mince. Once beef is brown, and onions and capsicums softened add the tomatoes, mushrooms and oregano. Simmer uncovered for 10 minutes.
Preheat oven to 180 degrees C. Grease a 20x30cm baking dish. Place half of the cooked spaghetti into the prepared dish. Top with half of the meat mixture. Sprinkle with 1 cup of the mild Cheddar cheese. Repeat.
In a medium bowl mix together cream of mushroom soup and water until smooth. Pour over casserole. Sprinkle with Parmesan cheese.
Bake in preheated oven for 30 to 35 minutes. Let stand 10 minutes before serving.