According to Apple documentation on debugging Core Data it says we should be able to pass an argument to the application which will output the SQL core data sends to SQLite.
Are you entering those as a single argument? It should be 2 arguments: "-com.apple.CoreData.SQLDebug" and "1".
More Info: You're actually overriding a "default" here. Take a look at the Apple Docs on argument-based defaults for more information. You'll see that the name and value are 2 separate arguments.