2. If budget is a constraint then visit www.pjrc.com and download the Paulmon monitor program and its help files. Nice one to start with and provides you with facilities to edit the code and data ram. And also some routines to send 16bit hex or ASCII values to screen.
fine, as long as you do not let them suck you into using the 8255.

3. If you can spend some money then just go in for a software development kit from Cygnal. That in my opinion is an excellent solution as it offers JTAG boundary scan. Debugging is then an issue of the past with its nice IDE. The whole assembler and size limited C-Compiler are from Keil- you cant ask for more.
You need to ($99) or you must get an ICE which cost much more. Before the Cygnal kit was available at such a low cost I would have supported Mickey Mouse debugging schemes, no more.
A note for newbies: IDE does not mean squat in the above, many IDEs does not have what the Cygnal kit has. Cygnal has implemented ICE features in their IDE. So, the fact that the joe blow board has an IDE does not mean that it has what Raghu talks about.

4. Get hold of a software simulator - many are available for free - search links on left and thee shall find. If you go in for a commercial development kit, it mostly comes alongwith it. These are very handy to learn the 8051 instruction set; try out small code snippets; check maths algorithms.
and once you have played with it throw it away. It is a good learning tool, but just look here how many threads we have had "it works in the simulator, but not on the chip. NO simulation is anything but.

5.If your hardware has some display device like a 7-Seg LED or character LCD module, then write a routine that can be called by your program to display 2 Byte values at a time.
If you get the Cygnal kit or an ICE there is no need for this.

Erik