I've been having the same frustrating problem. I finally found something that is working for me: making sure localhosts is being resolved correctly (and really explicitly).
Test to see if it works when your development machine is not connected to the net (no WiFi, no network cables). If it does work under those conditions, then it may be that you need to make sure that addresses are resolving to localhost properly. The messages that DDMS and adb.exe use for debugging and communicating to the VM must properly resolve to localhost on your machine. (Yes, it's odd that other commands using DDMS & adb work just fine but debugging doesn't. Seems that something in DDMS or adb needs to be standardized so they all work under the same conditions.)
If you need to make sure that things are resolving to localhost properly:
1) Make sure that this line is in your /Windows/System32/drivers/etc/hosts [windows] (or etc/hosts [*nix] file:
127.0.0.1 localhost
(you can have any amount of whitespace between "127.0.0.1" and "localhost")
2) If that doesn't work, then you may need to also add your PC's IPv4 address to the hosts file, and resolve it to localhost. (You can find out the IPv4 address for your machine with the ipconfig command.) If, for example, your machine's IPv4 address is 192.168.1.100 then you'd add the line
192.168.1.100 localhost
to your hosts file. (You can add it below the "127.0.0.1 localhost" line in the file.)
I had (1) in my hosts file but it still wasn't working (unless my PC wasn't connected to the net). I tried (2) on a bit of a guess, and that worked for me.
BTW: You can verify that adb (and your emulator if you're running one) is listening on ports by using the netstat -b command. (Note that on Win7 you need admin privileges for the -b option. I open a command window using "Run as Administrator.")
