I'll try to answer your questions as best I can:
1. The local variables window shouldn't be blank if you've paused in the program somewhere. At initial startup, it might be blank. Can you describe the circumstances where you're seeing the watch window work, but not the local variables? Simply clicking "Debug" does not set any compiler flags or rebuild the target. However, you should receive a warning if you attempt to debug when it is disabled in Compiler Options.
2. The executables are large because they are statically linked against the GNU Fortran runtime library. Many other GNU Fortran installations, and other Fortran compilers for that matter, dynamically link against their runtime libraries. However, that could introduce path issues (the GNU Fortran DLLs would need to be on your path) and portability issues (GNU Fortran would need to be installed on any other machines using the program). By statically linking, the issues are avoided at the cost of (what is cheap these days) disk space.
3. Yes, right now, you do. If the file is part of your project, though, you can hover over it in the Project Outline to see the full path.
Jeff Armstrong
Approximatrix, LLC