Process bread in a blender or food processor until fine crumbs form; transfer to a bowl. In same blender, combine the egg, water, onion, celery, Italian seasoning, salt and pepper; cover and process until smooth. Stir into the bread crumbs. Crumble beef over mixture and mix well.
On a 16x12-in. piece of waxed paper, shape meat mixture into an 11x8-in. rectangle. Top with the dried beef and cheese to within 1/2 in. of edge. Roll up jelly-roll style,starting with a short side; pinch to seal edges.
Place seam side down in a greased 11x7-in. baking dish. Bake, uncovered, at 350° for 1-1/4 to 1-1/2 hours or until a thermometer reads 160°. Let stand for 10 minutes before serving.
TEST KITCHEN TIP For meatballs, pat the beef mixture into a square about 1 inch thick. Then cut into 1-inch squares and roll each square into a meatball.