I am getting similar behavior with a simple WAR. (I had the same behavior where its breaks but the source is not found; right now, I have it where it isn't even breaking - that might be a different problem altogether, I dunno). I haven't find the magic to get it to work right.
Anyone have tips/tricks to get a deployed app's source to be found by Eclipse's debugger during a run of JBoss (run from within Eclipse using the JBossIDE DefaultServer menu items)?
I had a brain fart - I have it now breaking (it had nothing to do with JBossIDE or Eclipse).
I do think I found one thing that you have to make sure - in JBossIDE's launchers (Run->Debug... dialog that shows you the JBoss launchers), there's a tab "Source". In there you set up your source lookup paths. I had to add my project in there for it to pick up my sources.