While debugging a java app in eclipse I receive a "Source not found" error in two cases:
Eclipse debugging works with the class actually loaded by the program.
The symptoms you describe sounds like the class in question was not found in the project, but in a distribution jar without debug info found before the project you are working with.
This can happen for several reasons but have a look at the location where the classes showing this behaviour is found (look in the navigation pane to identify it). You will most likely need to change the build path of the project to avoid using this jar and have the JVM use the project instead.