1. Get Ready! Move your oven rack to the middle and preheat to 350°F (175°C). Cook your lasagna noodles according to package directions until al dente, then drain and set them aside.
2. Prep Your Veggies! If you're planning a festive Christmas tree design on top of your lasagna, set aside about a third of each red and green bell pepper. Dice the remaining parts of the bell peppers finely and keep them separate.
3. Brown the Goodness! In a large, deep skillet over medium-high heat, brown the Italian sausage, breaking it up into small pieces with a wooden spoon. Cook for about 2 minutes. Add the diced bell peppers, onions, and garlic powder, and continue cooking for 5-7 minutes until the sausage is fully cooked and the vegetables are tender.
4. Whip the Creamy Layer! While the sausage cooks, grab a mixer and beat the softened cream cheese for about 1 minute until smooth and creamy.
5. Add the Dairy! With the mixer on low speed, slowly pour in the milk in a steady stream until just combined.
6. Creamy Perfection! Increase the mixer speed to medium and continue beating for 2-3 minutes until the mixture is light, fluffy, and completely lump-free.
7. Cheese Blend Magic! In a separate medium bowl, gently toss together the mozzarella and Parmesan cheeses. Reserve 1½ cups (about half) of this cheese blend for later. Add the remaining cheese to your cheesy cream cheese mixture and mix until it's evenly distributed.
8. Layer It Up! Now, ensure any remaining fat is drained from your sausage mixture. Stir in the pasta sauce, water, and chopped fresh basil until everything is well combined.Spread a generous third of the sausage-sauce mixture evenly into the bottom of a 9x13-inch baking pan. Arrange 3 lasagna noodles over the sauce. Spread half of the cheesy cream cheese mixture evenly over the noodles. Add another layer of 3 noodles. Spoon half of the remaining sausage mixture on top. Place 3 more noodles. Spread the rest of the cheesy cream cheese mixture. Add the final 3 noodles. Top with the last of the sausage mixture and sprinkle with your reserved 1½ cups of cheese. If you're feeling creative, use your reserved bell pepper pieces to craft a festive Christmas tree design on top! 9. Bake to Golden! Cover your lasagna pan snugly with foil and bake for 45 minutes. Carefully remove the foil and bake for an additional 15 minutes, or until the cheese is bubbly and golden brown. Let the lasagna cool for a good 15 minutes before slicing and serving. Garnish with a little extra fresh basil if you like!