hmm ok I make this all the time with great success. A couple of questions so we can help
How big did you make your meatballs ? (mind you I make mine pretty big, too lazy to make them too small
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Liquid is important in the recipe to make the steam. If you want to thicken the sauce, you would need to do it after the meatballs are cooked. (I think this may have been your problem - Mr T where are you?? am I right??)
The frozen tomatoes would work, as long as you have the liquid in the sauce as well.
Don't be put off, this recipe really is worth a retry - my family love it and it is so easy. We generally make up three batches of meatballs at once. Cook one lot and freeze the rest.