I would appreciate some suggestions about the best way to handle the break/pause stuff. That's where the arduino stops program execution and waits for "F5 Continue".

The problem is that the debug session uses serial so is remote from visual studio. This means that we can close the debug window and stop a debug session or we can even shutdown our computer or unplug the arduino.

In all cases the arduino will continue to run and might be stopped at a breakpoint. When you re-start debugging in visual studio (might be weeks later).

Currently VS has no knowlege of if the arduino is paused or not so the debugger will re-start and appear empty or inactive.

In this case you can force an "F5 Continue" by sending any the "c" character using the serial window. 

Actually in the beta you can send any character except X but this might not be supported in future versions.