I have the same issue but with a 4MB flash size on an AZ Delivery dev board. I only enlarged the app partitions bij 64KB to allow a slightly larger program and added an SPIFFS partition for storage. This is my partition table with the same issue:
# MODIFIED ESP-IDF Partition Table
# Name, Type, SubType, Offset, Size, Flags
nvs, data, nvs, 0x9000, 20K,
otadata, data, ota, 0xe000, 8K,
app0, app, ota_0, 0x10000, 1344K,
app1, app, ota_1, 0x160000, 1344K,
spiffs, data, spiffs, 0x2B0000, 1344K,
I can confirm with the default partition sizes debugging works fine.