Did you build the app with or without signing keys? If you build your app with signing keys, that means you are building your app for distribution (to be published in the Play Store), which means you cannot debug the application. If you are building your application without signing keys, you are building a debug version of your app, and it should be debuggable.
I never had to put any of that snippet in my config.xml, so I am not even sure what that snippet does.