When the compiler optimizes the code (especially for size), it will reuse pieces of machine code it has already generated, modify register values without storing them back to RAM until absolutely necessary as well as all sorts of other tricks.

So, the structure of the code that the uC ends up executing can actually bares little resemblance to the structure of your C code. It should hardly be surprising then, that the debugger is jumping all over the place.

Always turn optimization off when debugging. If your program only fits in the platform's available memory when optimize-for-space is enabled, then things get a bit messy. Either use more memory on your prototype for debugging, or if possible, debug your firmware a few pieces at a time.

Matt.