debug=y mess with /etc/init.d/rc

When you define debug as "y" seen as if the /etc/init.d/rc script takes also
this value:
<file=rc>
...
# Un-comment the following for debugging.
# debug=echo

#
# Start script or program.
#
startup() {
  case "$1" in
        *.sh)
                $debug sh "$@"
                ;;
        *)
                $debug "$@"
                ;;
  esac
}
...
</file=rc>

and says:
y: command not found (or something similar)

I passed the debug var through the kernel cmdline (/proc/cmdline) (actually by
isolinux way).

I fixed for my tests putting an "unset debug" at the end of the "init" script.
Before of the "exec run-init..." of course.
I hope it help.