Place onion in food processor and pulse several times until it is very fine.
Heat saucepan over medium heat. Add 2 tablespoons olive oil and then the onion. Saute for a few minutes.
Add the next 13 ingredients (tomato paste through pepper). Whisk together to mix thoroughly. Bring to a boil, then turn down the heat. Keep the sauce simmering at a low boil and cook for about 20 minutes.
Meanwhile, puree peaches in food processor or blender. Once 20 minutes is up, add pureed peaches to sauce and whisk.