Hi,
Currently I can only think of three things:

1) I don't see a DEFINE OSC in your code - are you using 4Mhz?
2) PortA.4 is multiplexed with AN4 (analog input). Try adding ADCON1=7 to enable the digital input buffers on ALL analog inputs.
3) You have the code set for 2400 baud, did you set the terminal up for that as well?

Like you say, for this exercise it doesn't matter (since the PIC doesn't react at all) but with #65#49#49 the variables won't be loaded with 1 but with 49 since that's what your sending. To load them with 1 you'd do #65#1#1.

/Henrik.