Preheat oven to 350 degrees F. Lightly coat a 9-inch baking dish with nonstick spray.
Place potatoes and 1/4 cup water in a microwave-safe bowl. Cover and place into microwave for 4-5 minutes, or until tender; drain well and set aside.
In a large glass measuring cup or another bowl, whisk together eggs, milk and hot sauce; season with salt and pepper, to taste; set aside.
Heat olive oil in a large skillet over medium high heat. Add Italian sausage and cook until browned, about 3-5 minutes, making sure to crumble the sausage as it cooks; drain excess fat. Stir in bell peppers and potatoes until tender, about 3-4 minutes.
Remove from heat. Stir in 1/2 cup cheddar cheese until well combined.
Place sausage mixture evenly into the baking dish. Pour egg mixture evenly over the top and sprinkle with remaining 1/2 cup cheese.*
Place into oven and bake for 35-40 minutes, or until the eggs are firm.
Serve immediately, garnished with parsley, if desired.
Notes
*This can be covered and placed in the refrigerator for up to 24 hours. When ready to reheat, let the covered casserole sit at room temperature for 1 hour.