I have never used eclipse to debug java activity steps. However, I've often used a call to sendDebugMessageToTracer, which is very useful for putting information on the tracer to show what the java step is doing. For example:
pega_rules_utilities.sendDebugMessageToTracer("In the while-loop, strFound is " + strFound,"Pega-ProCom");
TWO IMPORTANT NOTES:
1) To allow these messages to be seen in your tracer, make sure you both ADD and ENABLE the "Debug" event type on the tracer settings screen.
2) In addition, see that ruleset mentioned in the second parameter, which is "Pega-ProCom" in the above example? You need to make sure your tracer settings has included a checkmark for that ruleset.