Heat oil in large skillet on medium-high heat. Add onions and garlic; cook and stir 5 min. or until onions are crisp-tender. Add tomato purée, sugar and crushed pepper; cook and stir 2 to 3 min. or until heated through. Add 3/4 cup cheese, gnocchi and 1/4 cup basil; cook and stir 2 min. or until cheese is melted and gnocchi is heated through, stirring frequently.