I had a play with the in-built monitor a while ago. It was nice, but I think I noticed that it didn't support the newer opcodes that Paul had introduced into the processor.
It wasn't too big a worry for me, as the in-built monitor seemed sufficient to have a play around and tinker with the available opcodes.
For bigger assembly projects/endeavours, probably a cross-compiler supporting this cpu (like Ophis, or there was a mention of another, ca65? cc65?) might be the way to go.
Just as an aside, I hope I can get back into the mega65 soon, I've been a bit distract with other aspects of life lately. It sure is a fun project :)