A new (scalar) spectral decomposition is found for the Dirac system in two
dimensions associated to the focusing Davey-Stewartson II (DSII) equation.
The discrete spectrum in the spectral problem corresponds to eigenvalues em
bedded into a two-dimensional essential spectrum. We show that these embedd
ed eigenvalues are structurally unstable under small variations of the init
ial data. This instability leads to the decay of localized initial data int
o continuous wavepackets prescribed by the nonlinear dynamics of the DSII e
quation.