Hello Benedikt, Osama and MK,
after further investigation, we can confirm that since MATLAB Release 2016a, it is not possible to continue a simulation using 'PauseFcn' callback anymore.
We disallowed calling "set_param(gcs,'SimulationCommand','continue')" from the 'PauseFcn' callback, as this is the kind of thing that can easily end up in an infinite recursion if not done properly.
There is currently no workaround to achieve the old behavior; so the best way to move things forward would be to look into other alternate workflows that would be more robust to achieve what you really need.
For example, if you perform co-simulation, an S-Function could do something similar to what the 'PauseFcn' callback is doing. You would not need to pause, the S-Function would call the external environment, wait for it to do its thing and when it is done, it would keep moving forward. That would be a lot more robust and would probably be faster too.