Mix egg, 1/4 c milk,and bread. Let stand for about 5 minutes.
Mix meat, onion, 1 tsp salt,1 tsp. sugar, allspice, and nutmeg. Add egg mixture and blend well. Form small meatballs and drop into hot butter in skillet and brown on all sides. Remove from pan and keep warm.
Into the skillet, stir in flour, salt, pepper, and paprika, Slowly stir in 1 c milk and 1 t sugar. Stir and add meatballs, simmer until sauce thickens. Serve over hot egg noodles.