Two options I found on other forums:

1. Finally, I just deleted all the files in C:\Program Files\Common Files\Microsoft Shared\VS7Debug (stop the Machine Debug Service first), copied fresh ones from my MSDN DVD, and restarted the service. Bingo.

2. http://digioz.blogspot.com/2007/08/debugger-is-not-properly-installed-run.html

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