I think the problem  has to do with the fact that you're trying to step it
through.

Take your breakpoints off and let it run.

Worked fine for me on 2003 once I did this.

"Can't enter  break mode" includes having the VBE get control so you can
single step. (No real idea why it has problems with debugging this code,
but remember that deleting a worksheet also deletes its code  module from the
VBE, so it must be having trouble with the fact that the programming scope
has changed, even while it's trying to show it to you in debug  mode.)