It's strange answering my own questions but it's working now and I was able to correct the error in my script.
Very stupid one actually 
.
I has forgotten to read the other imported values into the local variables, the rest of the code worked like a charm.
SELECT "TIMESHEETID", "S4HCOUNTER", "S4HCATS_DELETE_COUNTER", "STATUS"
INTO TIMESHEETID, S4HCOUNTER, S4HCATS_DELETE_COUNTER, STATUS
FROM :row;
IF (:TIMESHEETID = ' ') THEN
error = SELECT 400 AS http_status_code,
'empty field' AS error_message,
'TIMESHEETID must be filled in' AS detail
FROM dummy;
ELSE
-- rest of coding, you can check original question for details if you want.
END IF;
Triggering the debugger in the web tools also works with the script below (you need to add DROP test table otherwise a second row will be added when you execute the sql the second time which will result in an error in the procedure when reading the value from :row without index).
-- Create test data table
CREATE TABLE hciupdate
(
Add your fields here...
);
-- Add test data
INSERT INTO hciupdate (TIMESHEETID, S4HCATS_DELETE_COUNTER, S4HCOUNTER, STATUS)
VALUES (51,000000001893,0000001892,2);
-- Call procedure and pass table with test data
CALL "__"."__.global.procedures.interfacing::TimesheetToHCIUpdate"(ROW => 'hciupdate' ,ERROR => ?);
-- Delete test data table
DROP TABLE hciupdate;
So this has been fun 
.
OPEN Question:
Still don't know why stored procedure debugging did not work in any possible way using Eclipse Mars 4.5.2 while I clearly have enough authorzations etc ?