When the code has been compiled on a different machine outside of PDSOE and then copied to the PDSOE machine in the correct folder, the debugger in the PDSOE shows the message that the source code cannot be found when stepping through the code.

ABL file not found
<Edit Source Lookup Path>

The code can be either local or attached to a PASOE in the debug configuration.

This is expected behavior.
The compiled r-code contains the file name and depending on the compile statement, the full path of the file.
This is visible at the top when opening the r-code file in a text editor.
When this path does not match the folder reference on which the debugger runs then this error will occur.

It was determined that the Progress Product is functioning as designed.

An enhancement to the product can be requested through the Progress Community via an Ideas submission. Customer feedback is valuable and Idea submissions are monitored by our Product Management team. Enhancement requests are reviewed during the planning phase of each new product release and a list of the enhancements chosen for implementation can be found in the Release Notes documents that accompany each release. Once an Idea is submitted the Progress Software Community will have the opportunity to comment on and vote for the Idea.

For detailed information on how to submit an Idea, please refer to Article How to submit an enhancement request for a Progress product?.

Make sure that the folder structure used by the PDSOE is exactly the same as used by the compiler on the other machine.
Or  recompile the files in the PDSOE.