Heat oven to 350°F. Cook and drain pasta shells as directed on package.
In 10-inch skillet, cook ground beef over medium-high heat 5 to 7 minutes, stirring occasionally, until thoroughly cooked; drain. Cool slightly, about 5 minutes.
In large bowl, mix pasta sauce and water. Pour 1 cup of the pasta sauce mixture in bottom of ungreased 13x9-inch (3-quart) glass baking dish. In medium bowl, mix cheese spread, 1 cup of the Italian cheese, the Parmesan cheese, egg and cooked ground beef. Spoon heaping tablespoon mixture into each shell. Arrange stuffed shells over sauce in baking dish. Pour remaining sauce over top, covering shells completely. Cover with foil.
Bake 40 to 45 minutes or until bubbly and cheese filling is set. Sprinkle with remaining 1/2 cup Italian cheese. Bake 10 minutes longer or until cheese is melted. Sprinkle with parsley.