Hi there,
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Stored procedures seem to add a level of abstraction which offers little of use.
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They indeed do add an additional level of abstraction but not without offering additional benefits. What I like about stored procedures is reuse and maintainability. It's a lot easier to make a change to a stored procedure than to make the same change in code as you don't have to deploy the entire application.
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I also find it a nuisance to open up a seperate app to debug sql.
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Not sure exactly what you mean with debug your SQL; if you mean manage and change your code, you can do most of it with the built-in tools. In addition, the upcoming Juneau project may bring SQL development closer to Visual Studio:
http://msdn.microsoft.com/en-us/magazine/hh394146.aspx
Based on your description, I'd say either option works. Just pick what you feel most comfortable with.
Cheers,
Imar