Serial Timeout Strange Issues

[Archangel]

Tell us about the power supplies and what you have done to suppress any noise from the power supply going to the PIC. You should have (MUST ?) a bypass capacitor right between the PICs power pins, you should have the servos on their own supply and I would recommend a nice fat 10 µF or larger Cap to pick up Low Freq spikes as well, Make sure the pics are not browning out when they run, all serial wires should be at the very least twisted, shielded is better but probably overkill, be aware fluorescent lights can cause misbehavior too. If all else fails try setting things up at a slower baud rate and if that works increase it until it fails, other things to check are, how sure are you about the actual oscillator speeds, are you using crystals, resonators or just R/C oscillators?

EDIT; Oh and Dave pointed this out a while back from the data sheet . . .
Note: When using resonators with frequencies
above 3.5 MHz, the use of HS mode rather
than XT mode, is recommended. HS mode
may be used at any VDD for which the
controller is rated.

EDIT2: Define osc 4 MUST BE ALL UPPERCASE LETTERS . . . DEFINE OSC 4