Bizarre undebuggable plugin behavior... need help

I'm running into the weirdest plugin issue I've ever encountered so far while developing eclipse plugins. Here is the scenario - for the moment it does not even matter what this plugin does:

a plugin is installed the usual way, and we start eclipse with a new workspace. In this workspace, the plugin in question shows faulty behavior. Now, use PDE to start a runtime workbench from the instance already running. Try the same plugin in this runtime workbench, and voila.... it works properly.........?????????? The workspace of the host has no plugin code in it, so the exact same installed plugin is being used in the runtime workbench. Yet it fails in the host, and works in the runtime. How can that be? I tried both the run as application and run product. How do I even begin to debug something like this (since it works in the runtime/debug workspace but not when installed)? Any ideas welcome!