Heat oven to 350°F. Spray 11x7-inch (2-quart) glass baking dish with nonstick cooking spray.
In medium bowl, combine potatoes, 1 1/2 cups of the cheese, the sour cream, Italian seasoning, peppered seasoned salt and soup; mix well. Spread in sprayed baking dish. Cover tightly with foil. Bake at 350°F. for 30 minutes.
Remove from oven. Uncover; arrange meatballs in rows over potatoes, pressing in slightly. Sprinkle with remaining 1/2 cup cheese.
Return to oven; bake uncovered an additional 20 to 25 minutes or until golden brown and hot in center.