I\'m deploying a precompiled and all-page-merged website using Web Deployment Projects on Visual Studio 2008. Note that all assemblies and projects have been compiled in Release
According to the documentation:
Specifies whether to compile debug binaries rather than retail binaries
However, having just quickly reflected through System.Web, I can see the debug flag is used (directly or indirectly) by the following:
As a result, if your site is precompiled you will not receive a performance hit. However, as the HttpApplication will respond to the DEBUG http verb, you open yourself up to security problems.
In short, set debug=false, even if your site is precompiled.
Edit: debug=true will result in a performance (see Mehmet Aras's answer) hit for caching and no execution timeout, but it will not reduce execution speed for compiled pages.