I don't know how it happened but I broke my debugger, but it's OK; I fixed it! After reading some posts on MIBUSO (or was it dynamics user?), it seems I am not the only person this has happened to. Thankfully, reading the forums also pointed me to the solution.
The symptoms of the problem are that the debugger for Dynamics NAV 5.0 (and earlier versions) launches but the code window is not displayed. On my machine this happened for version 5.0, version 4.0 SP3, 4.0 SP2, clean installs, you name it. The only thing I could do was close the debugger window, which caused the window to close and then be re-launched after a short pause (I figured this was because the program was getting to the next trigger. You can see similar behaviour if you close the debugger when it is working properly). I kept closing the window and eventually returned to NAV (giving me chance to turn the debugger off).
I logged this as a support issue with Microsoft but the suggestions they gave me (based upon previously solved incidents) didn't help. The premise of their suggestions was that the debugger and application communicate using TCP/IP and that something (most likely an anti-virus program or firewall client) was intercepting this communication and preventing the debugger from displaying the code.
After trying various options suggested by Microsoft, I finally got fed up and searched for the solution myself. I was quite surprised to find lots of people with the same problem - although there were a large number of postings from people that had either not found a solution or not updated their post. I think the best posting I found was on the dynamics user group (although I think the same solution was shown on MIBUSO).
For me the solution was to use Add/Remove programs from the control panel to remove a program called "Advanced Gateway Client". I don't remember installing this program and after I removed it the only difference I noticed was that my debugger worked again. Debuggered!