Is there a possibility of having more than one settings file? If so, ensure that your manage.py is pointing at the right settings file. The output of 'manage.py runserver' should also show the dotted path of the settings file that it is using just before that error is displayed (I believe).
You can also verify that your DEBUG value is being correctly parsed by running 'manage.py diffsettings'. One of the lines of output should be 'DEBUG = True' since DEBUG defaults to False. If it isn't there, then your DEBUG setting is somehow set to True (or may be missing from your settings.py file). If you are on a Linux host shell, you can run 'python manage.py diffsettings | grep DEBUG' to filter the lines containing DEBUG or on Windows 'manage.py diffsettings | find "DEBUG" '.
-James