Lay the zucchini and squash slices in a flat layer on kitchen towels. Lightly salt on both sides and let sit until most of the liquid has been released, about 2 hours.
Preheat the oven to 350°F.
In a large skillet, heat the olive oil over medium-high heat. Add the onions, thyme, salt, crushed red pepper and ground black pepper, and saute until the onions are softened and caramelized, about 15 minutes.
In a small bowl combine the extra virgin olive oil, basil and garlic, and steep 15 minutes.
In a large bowl, toss the zucchini and squash with the flour to lightly coat.
Rub 1 tablespoon of the basil oil on the bottom of a baking sheet. Spread the onions in a layer on the bottomof the baking sheet. Arrange one row of zucchini lengthwise on top of the onions, overlapping the edges slightly. Lay a thin row of red peppers next to the zucchini, then a row of squash. Repeat with the remaining ingredients. Evenly drizzle the remaining basil oil over the vegetables. Top with an even coating of breadcrumbs, then cheese.
Bake until light golden brown on top, about 40 minutes.
Yield: 8 to 10 servings