In a large skillet, sauté onion and green peppers in butter until tender.
Add tomatoes, mushrooms, olives and oregano. Simmer uncovered for 10 minutes.
Place half of the cooked spaghetti in a greased 9x13-inch baking dish. Top with half of the vegetable mixture. Sprinkle with half the Cheddar cheese. Repeat layers.
Mix soup and water until smooth, pour over the casserole. Sprinkle with parmesan cheese.
Bake, uncovered, at 350°F for 30-35 minutes or until heated through.