Try running UFT as ADMIN. If you can get break points to work then recommend uninstall and re install with UAC set to none and as local admin.
When UFT is installed UAC (User Access Control) must be set to none and done by an account with local Admin right? I have found that some installs do not follow the require permissions setting. Recommend reviewing the following document from HP:
Document ID: KM183747
Title: What are the minimum permissions required for QuickTest Professional (QTP), Service Test (ST), Sprinter (SP) and/or Unified Functional Testing (UFT)?