Here is the quick overview of what you need to-do to enable debugging on a Microsoft Windows 7 machine:

1. Update the Just-In-Time debugger setting DbgJITDebugLaunchSetting.  The setting is found in the registry at [HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\.NETFramework]. 
2. Set the value of DbgJITDebugLaunchSetting to 2.
3. If you are using a 64bit operating system then you must also set the same key (DbgJITDebugLaunchSetting) in this folder [HKEY_LOCAL_MACHINE\SOFTWARE\Wow6432Node\Microsoft\.NETFramework] to 2.
4. If you run into any issues try running CodeSmith Studio and Visual Studio as an administrator.

Now when Codesmith enters a break point you will see something like this:

Click Yes, debug CodeSmithStudio to continue debugging.