The usual cause for this behavior in the 1.3.1 JVM and earlier is that the JVM cannot locate jdwp.dll, which is required for debugging. You must put the location of jdwp.dll on your system path so that the runjdwp statement can find it. The location of the jdwp.dl for the JVM shipped with MATLAB is:
where $MATLAB is your root MATLAB directory.
To add this directory to your system path, follow the link under related solutions.