Big thanks to Jeff at MeLabs for the super fast fix to this one.

Here's the fix.

Open your PBPPIC14.LIB file.

Add the following 3 lines of assembler starting at line 5011 in PBPPIC14.LIB:
Code:
     ifdef SEROUT2TO_USED
        bsf STATUS, C ; Set carry for no timeout in case of blanking
     endif
When finished it should look like this from line 5010 to 5019;
Code:
serout2send1 movf R0, W         ; Get char back
    ifdef SEROUT2TO_USED
        bsf STATUS, C ; Set carry for no timeout in case of blanking
    endif
        btfss   STATUS, Z       ; If zero, goto blank check
        bcf     GOP, 7          ; Not zero so clear blank
        btfsc   GOP, 7          ; If blanking on, don't send
        return
        addlw   '0'             ; Add ASCII offset
        goto    JUMPMAN         ; Send it