When trying to debug an application try this:
set the project to run epoc instead of your application - useful if you want to see exit reasons
debug the project
go to downloads and start your project
note you can stop on break points - super
exit the project
start it again
wait until it stops on a break point
Now notice that carbunkle has decided you don't need to be able to step in, out, over, through, near, or even carry on from the break point. Your only option is to kill the emulator.
This is the second place I've noticed people being 'clever' with the greying of menu items, but not clever enough to get it right.