Darrel, I upgraded MPLAB, MCS+ and PBP3.0 as required. No change.
However, I changed power supply to my circuit, the 16F628a and MAX232 chip. Instead of using the limited power supply of the LabX1, I used my other supply, a switching walwart supply. NOW my serial communicator works first time everytime. Type an "h", get an "h".
Obviously I was stressing the LabX1 supply and must have caused it to clip or get noisy.

Still have the compile ICD that doesn't work.