Good news is I am able to debug under 1.3.4. I upgraded my app to 1.3.4.

FYI, I am using ldap authentication using Acegi plugin 0.5.3. After clicking 'Login', it throws a Nullpointer exception. After debugging, I found out that authenticateService is null. Hence, exception is thrown from loadUserByUsername() method of GrailsDaoImpl groovy. Commenting out this line --- if (authenticateService.securityConfig.security.useNt lm) --- makes everything work fine though I have some UI related issues. Though this is a work around for now, it needs a proper fix. I could not figure out, what is causing this object authenticateService to null. Appreciate your response.

btw, note: STS prompts you to upgrade to latest version of plugins if you are using older versions. e.g datasources-0.3 instead of datasources-0.5. If you say 'N' for upgrade, it fails to start the app. This is annoying.