You've not mentioned which version of PBP you are using. I think I'm correct in stating that you can't use the word loop as a label in vers 2.60. Things like "main" are probably OK.

I've just searched through my PIC samples and don't have the one you are using. Is there any reason why you chose this PIC to use with an LCD as there are lots of other PICs that don't have the amount of functionality crammed into it as the 688.

As you have stated that you have a flashing LED, this would suggest the code is running, but the LCD isn't responding... this suggests a timing issue. You have used what looks like an external config setting (@__EXTRC_OSC_NOCLKOUT) but in the code it states "internal 4Mhz". Are you using the internal 4Mhz timing or an external crystal, if internal then that fuse should be something like @_INTRC_OSC_NOCLKOUT.

It's also worth posting up your schematic of how you have the hardware set up