You must start the server in debug mode, not the application you're testing. You can do that during the Servers view or the JBoss Servers view.
Doh. Didn't see that. Guess I have been using the old IDE for too long. Sorry about that.
Have you noticed that debugging on Linux is much slower on Linux than on windows? When I hit a breakpoint and try to step, there is a at least a couple second delay between each step but I don't experience the same behavior on windows. I noticed this with 1.6 GA as well. I am using the JRockit JRE.