Go back to the CF Debugger Settings panel and uncheck all of the download options. You've used to Flash programmer tool to program the Flash already, there's no sense in trying it again. These settings are for RAM-based code debugging. To confirm this, try the following:
1) Make a new CF project using your board type. You'll notice that it has several build targets: CONSOLE_RAM, RAM, and INTERNAL_FLASH.
2) Pick either of the two RAM-based build targets from the drop-down menu. Now open the CF Debugger Settings panel. All of the items in the Program Download Options group are checked.
3) Now select the INTERNAL_FLASH build target and examine the CF Debugger Settings panel. The entire group is unchecked. That's because you do the Flash programming from the Flash tool.
Try unchecking these options for the Flash build and see if you can debug now.
---Tom