I agree with the JTAG debugging mode. I recently took on a project to upgrade the software for a 10 year old 8051 based product. No ICE unit wa available and the project size did not warrent spending ~2K $ to acquire one. What I did was to purchase one of the Cygnal development boards for 99 $ which comes with a nice tool set. I then made an adapter board that fit in the original processor PLCC-44 socket and hosted a Cygnal processor on top along with a fine pitch flex print connector for attachment of the JTAG download/debug cable. The adapter "cost" about a day of work to engineer. Cost wise it was about 65 $ with the most being for the PLCC-44 socket compatable foot on the bottom that I got from Ironwood Electronics. This worked very well and even was quite successful despite the fact that the target board was a 5V design and the Cygnal part was 3.3V and so I had also to put a 3.3V LDO regulator on the adapter and pullup resistors on the all the I/Os that were being driven out of the Cygnal processor.

Any one interested in seeing some pictures of this please email me.