In order to debug .NET 1.1 properly, it is necessary to uninstall the .NET 2.0 framework when you want to debug. The command to uninstall is:
C:WINDOWSMicrosoft.NETFrameworkv2.0.50727aspnet_regiis.exe -u
The command to reinstall when your are done is:
C:WINDOWSMicrosoft.NETFrameworkv2.0.50727aspnet_regiis.exe -i