Such debates are most familiar from US Presidential elections, but they take place in many countries around the world, including countries that have a similar parliamentary system to the UK where leaders regularly go head to head in parliament. Here are a few examples courtesy of YouTube:
First we have the start of the leaders' debate from the 2007 Australia election, featuring John Howard (Liberal/National Coalition) and Kevin Rudd (Labor):
UPDATE: This clip is no longer available on YouTube but can be seen on the CBC website. Many thanks to forumer Severian for this link.
And thirdly we have the start of the leaders' debate from the 2008 New Zealand election featuring Helen Clark (Labour) and John Key (National):
So will we have a leader' debate at the next election? We shall see...