i'll also add that I cannot perform either one of the steps described in "To make breakpoints halt sketch execution when passed..." section of the debugging guidelines. 

"Set "Break/Pause" to "True" in the Project Properties window"
-I don't know were to find this option in atmel studio project properties

"Deselect "Auto Continue" in the "Breakpoint Manager" menu item of the Serial Monitor Options button"
-my serial monitor window does not have an "options" icon so I cannot follow this step in the debug guidelines 

Yes some confusion.

Automatic debug is fine, it simply avoids have to enable debug for each configuration. 

If you do not want to debug using the upload port (which you are not using because you have avrisp) then follow this guide and ensure RemotePort specifies the usb port http://www.visualmicro.com/page/User-Guide.aspx?doc=Debugging-With-Different-Por...

If you want to debug using Atmel and not Visual Micro then build the project using Visual Micro and then click "File>Open object file for debugging"

The default break/pause, continue settings are/were fine

Thanks

I don't know much about hardware debug for Arduino. The reports I hear are that you have to set some fuses, make a small alteration to the board and sometimes risk corrupting the mcu.

I think it's why most people have stayed away from it. As you see it's also difficult to work with .ino files. The atmel "open object file for debugging" loads a cpp project without .ino so it's not much fun.

This is the reason why I made the simpler usb debug