The new Monotouch iPhone debugger supports debugging on both the simulator and the device. The device debugging works over wifi, so once you’ve deployed the app to the device, you can debug it wirelessly when on the same network (how cool is that)! Here’s a quick look at the debugging experience:

In Monodevelop you just need to select the Debug|iPhone configuration (or Debug|Simulator if not using the device), build and deploy the debug build to the device as normal. Then, either connected or not, you can simply start debugging. When the debugger launches it will prompt you to start the app on the device. After startup, the interaction goes back and forth between the device and Monodevelop, stopping wherever you set breakpoints. So conceivably, you could have testers interacting with the app at their desks while you debug it at yours. Also note that standard output goes to the Application pad in Monodevelop. You can read more about the debugger here:  http://monotouch.net/Documentation/Upcoming/Debugger