Prepare peppers and oven: Preheat oven to 375°F. Slice off top quarter-inch of each bell pepper and remove stems, membranes, and seeds. Arrange peppers upright in a 9x13-inch baking dish.
Cook the base: Heat olive oil in a large skillet over medium-high heat. Add diced onion and cook 3 minutes until softened. Add minced garlic and cook 30 seconds until fragrant.
Brown the meat: Add ground beef to skillet, breaking apart with wooden spoon. Cook 6-8 minutes until browned with no pink remaining. Drain excess fat.
Create the filling: Return skillet to medium heat. Stir in cooked rice, diced tomatoes with juices, half the tomato sauce, Italian seasoning, garlic powder, salt, and pepper. Simmer 3 minutes. Remove from heat and fold in 1 cup mozzarella and all the cheddar cheese.
Stuff the peppers: Spoon beef and rice mixture into each pepper, packing gently to the top. Pour remaining tomato sauce around base of peppers in dish, adding 1/4 cup water.
First bake: Cover dish tightly with aluminum foil. Bake for 35 minutes until peppers are tender.
Add cheese topping: Remove foil and sprinkle remaining 1/2 cup mozzarella cheese over pepper tops. Bake uncovered 10 minutes more until cheese is melted, bubbly, and lightly golden.
Rest and serve: Let peppers rest 5 minutes before serving. Garnish with fresh parsley or basil. Serve with sauce from bottom of dish spooned over each pepper.