Preheat the oven to 350 degrees F (175 degrees C). In a shallow dish, stir together the flour, salt and pepper. In a separate bowl, whisk together the eggs and water with a fork. In a third bowl, or shallow dish, mix together the cracker crumbs, 1/3 cup of Parmesan cheese and basil.
Heat the oil in a large skillet over medium heat. Dredge the cube steaks in the seasoned flour, dip into the egg mixture, and coat with the cracker crumb mixture. Place them in the skillet, and fry just until browned on each side. Arrange steaks in a single layer in a greased casserole dish.
Bake for 25 minutes in the preheated oven. Meanwhile, in a medium bowl, stir together the tomato sauce, sugar, 1/4 teaspoon of oregano, and garlic powder. Spoon over steaks when the 25 minutes are up. Top each steak with mozzarella cheese and remaining Parmesan cheese; sprinkle remaining oregano over the top. Bake for 5 more minutes, or until the cheese is melted, and the sauce is hot.