Xdebug 3 - The setting 'xdebug.remote_***' has been renamed, see the upgrading guide

Xdebug 3 will be supported from PhpStorm 2020.3 version only, which is currently in EAP stage (Early Access Program) and will be released in about 1 month time.

For the moment you will have to either stick to Xdebug 2.9 for your 2020.1 IDE version or try latest 2020.3 EAP build: https://www.jetbrains.com/phpstorm/nextversion/

Xdebug 3 is supported in the most recent EAP #6 build: https://blog.jetbrains.com/phpstorm/2020/11/phpstorm-2020-3-eap-6/

As for the Xdebug 3 upgrade in terms of making changes for Xdebug settings (php.ini) -- check this link: https://3.xdebug.org/docs/upgrade_guide

Xdebug 3 related docs are currently hosted on a temporary https://3.xdebug.org/ domain.

You CAN use your 2020.1 PhpStorm with Xdebug 3 if you wish -- just configure Xdebug 3 properly.

It works fine for me with Xdebug 3.0.0beta1, PHP 7.4 x64 on Windows 10 -- see this question: https://.com/a/64820427/783119

Those errors that you see indicate that you still have Xdebug 2 config values in your php.ini.

Be eager in the controller and call .ToList() before disposing in order to schedule the execution of the query immediately before you have left the using block (as after that it is too late, the context is gone):

using (MyEntities db = new MyEntities())
{
    var model = 
        from c in db.Categories
        select new Category 
        { 
            CategoryID = c.CategoryID, 
            Name = c.Name 
        };
    return View(model.ToList()); // <-- .ToList() here
}

Now, while this will solve your particular problem, what developers or dependency injection frameworks usually do is to instantiate the DbContext inside the BeginRequest event, store it inside the HttpContext.Items so that it is available throughout the execution of the entire request and inside the EndRequest method, retrieve it from HttpContext and dispose it.

UPDATE:

Also it is a good practice to use a view model containing only the properties you would like to use in this particular view:

public class CategoryViewModel
{
    public int Id { get; set; }
    public string Name { get; set; }
}

and then inside your action:

public ActionResult Index()
{
    using (MyEntities db = new MyEntities())
    {
        var model = 
            from c in db.Categories
            select new CategoryViewModel
            { 
                Id = c.CategoryID, 
                Name = c.Name 
            };
        return View(model.ToList());
    }
}

and in the view:

@model IEnumerable<MyProject.Models.CategoryViewModel>

@foreach (var category in Model)
{
    <p>
        Id: @category.Id 
        Name: @category.Name
    </p>
}

Xdebug 3 will be fully supported in PhpStorm 2020.3 version only, which is currently in EAP stage (Early Access Program) and will be released in about 1 month time.

It is already supported in the most recent EAP #6 build: check this blog post for more info: https://blog.jetbrains.com/phpstorm/2020/11/phpstorm-2020-3-eap-6/

I have downloaded Xdebug 3.0.0beta1 for my PHP 7.4 on Windows 10, configured it from scratch (using correct Xdebug 3 config values: https://3.xdebug.org/docs/upgrade_guide and https://3.xdebug.org/docs/all_settings) ... and it still works fine in PhpStorm 2020.2.3.

Yes, IDE sends old-style parameters when initiating debugging for a CLI script (like xdebug.remote_{host, port} etc) but the debug still works just fine.

This is my php.ini content for Xdebug 3 settings (as simple as this):

[xdebug]
xdebug.client_host = 127.0.0.1
xdebug.client_port = 9001
xdebug.mode = debug

(I have a bit mores settings, but those are customisation for output file names, log locations, extra stuff for quickly turn on some options in some scenarios/when needed etc -- these are not needed here and it works fine without them)

CLI debug initiated from IDE ("PHP Script" type of configuration):

That's what IDE is executing: E:Projectsphpphp74php.exe -dxdebug.remote_enable=1 -dxdebug.remote_mode=req -dxdebug.remote_port=9001 -dxdebug.remote_host=127.0.0.1 E:Projectsweb_idetesttest.php. As you may see these old style parameters do not affect Xdebug 3 at all.

P.S. If I set xdebug.start_with_request = yes in php.ini then debug will work even for Run (or when executing that PHP script outside of IDE) -- as long as "phone handle" icon is green (IDE listens for incoming debug requests).