In a large saucepan, place the hot Italian sausage, pepperoni sausage, green bell peppers, onions, mushrooms, diced tomatoes, tomato sauce, tomato paste and water. Bring to a boil. Boil 30 minutes, reduce heat and simmer 90 minutes.
Preheat oven to 375 degrees F (190 degrees C). Melt the butter in a large skillet over medium high heat. Place the onion in the butter and saute for 5 to 10 minutes, or until tender. Stir in the thyme and remove from heat.