I finally was able to get the ESP8266 working with compiling and OTA.
My first issue was compiling.  The path to the compiler was wrong, so in order to get the esp8266 data in the correct directory, i simply installed the board through the arduino ide instead.
Secondly, i could not get OTA working.  First error was that the ip address was not showing up,  In order for the esp8266 to be discovered, Apple bonjour must be installed. I just installed the Bonjour for printers. Now you must install Python 2.7. python is needed because visual micro uses a python file to run that transfer the data to the esp8266.  After this i could then see that the python.exe was being called but failed with an error of file not found.  I copied the path and pasted it into the root of a cmd windows and it failed as well. I then posted into the python directory and the file was transferred!  So i added the path to python in the PATH command in the environments variable and it worked great !
This is a great IDE and once these few tweaks get worked out it will be fantatic. I am ready to upgrade to the pay version !

The last issue is that i cannot seem to get debugging, and perhaps it is just for the actual arduino boards. not the esp8266.  Can this be confirmed?

Yes debugging seems to work !  awesome.