Soak the sun-dried tomatoes. Place them in hot water for about 10 minutes to rehydrate and soften. Once done, drain and finely chop. Divide them according to the recipe: 2 tablespoons for the meatballs and 1/3 cup for the sauce.
Make the meatballs. In a large bowl, combine the ground chicken, egg, panko breadcrumbs, 2 tablespoons of the chopped sun-dried tomatoes, 2 tablespoons of grated Parmesan cheese, chopped basil, oregano, garlic powder, onion powder, salt, and pepper.
Form the meatballs. Use a small cookie scoop or spoon to form about 24 meatballs. Place them on a lined baking sheet.
Bake. Bake the meatballs at 400°F for 14-15 minutes, or until fully cooked and lightly golden.
Make the sauce. While the meatballs are baking, heat the olive oil in a skillet over medium-low heat. Add the chopped shallot and minced garlic and sauté until translucent and softened, about 3-5 minutes.
Add the liquids. Remove the skillet from the heat and stir in the milk, light cream cheese, tomato paste, oregano, salt, pepper, red pepper flakes, and remaining 1/3 cup of chopped sun-dried tomatoes. Return to low heat and stir until the cream cheese is fully melted and the sauce is smooth.
Thicken the sauce. Make a slurry by mixing 1 tablespoon of cornstarch with 1 tablespoon of water. Stir it into the sauce over low heat until thickened.
Finish the sauce. Add the remaining Parmesan cheese and chopped basil. Stir to combine.
Combine and serve. Gently stir the cooked meatballs into the sauce. Top with fresh basil and serve however you like!