He Leonardo:
I did pass all those checks. The relevant one was #6 (the one regarding the board capabilities). This issue did not come up with an Arduino Uno. As far as I can see, SystemModeler has compatibility issue specifically with Arduino Mega 2560. I say this because I could make the Blink LED tutorial worked perfectly with an Arduino Uno (after a minor tweak of attaching a separate LED).
Thanks for help!
