Without seeing more of the code, it's not possible to know if the following situation is your problem, but it could be.
When you have mutually exclusive branches of code that both do a SELECT...INTO to the same temp table, a flaw causes this error. SELECT...INTO to a temp table creates the table with the structure of the query used to fill it. The parser assumes if that occurs twice, it is a mistake, since you can't recreate the structure of the table once it already has data.
if @Debug=1
select * into #MyTemp from MyTable;
else
select * into #MyTemp from MyTable;
While obviously not terribly meaningful, this alone will show the problem. The two paths are mutually exclusive, but the parser thinks they may both get executed, and issues the fatal error. You extend that, wrapping each branch in a BEGIN...END, and add the drop table (conditional or not) and the parser will still give the error.
To be fair, in fact both paths COULD be executed, if there were a loop or GOTO so that one time around @Debug = 1, and the other time it does not, so it may be asking too much of a parser. Unfortunately, I don't know of a workaround, and using INSERT INTO instead of SELECT INTO is the only way I know to avoid the problem, even though that can be terribly onerous to name all the columns in a particularly column-heavy query.