I use the following in my ON CONNECT event:

debug -i nul debug_handler

I have an alias called debug_handler that checks certain things before letting them pass through to mirc (it started as a workaround for an old exploit).

It works fine, but if I decide to /debug debug.log on a certain server, it says that it is outputting debug to debug.log and it is not!

I even tried typing /scon -a debug off -- then I typed /debug on debug.log -- It said it was outputting to debug.log and it still did not. Usually the "bugs" I find have very little merit but this one might be for real shocked