Debugging #AJAX and FormAPI
Using dd($form_state); within the callback function works beautifully. 

On linux you can tail -f /tmp/drupal-debug.txt to see the $form_state in real time. (Or whatever the temp directory for your site is set to, often something like sites/yoursite.com/files/tmp.)

Otherwise, you can find drupal-debug.txt in your systems /tmp/ directory.
http://ratatosk.net/drupal/tutorials/debugging-drupal.html#dd