This is now fixed. Thanks go to Darrel Taylor over at melabs for giving me a clue.

Repaired Code with less coments.

Code:
'****************************************************************
'                                                          *
'*  Notes   :  DC motor ESC written for PIC12F683               *
'*          :  Input from RX - Throttle                    *
'*          :  PWM FET Driver Output                       *
'*          :                                                   *
'****************************************************************
#CONFIG
  __config _INTRC_OSC_NOCLKOUT  & _MCLRE_OFF & _CP_OFF & _IESO_OFF & _WDT_ON
#ENDCONFIG

Include "modedefs.bas"
ADCON0 = 0   'A/D Off
CMCON0 = 7   'Comparators Off
ANSEL = 0    'Set all Digital
osccon = %01100000 '4mhz
DEFINE osc 4 'Set oscillator to 4mhz'
DEFINE DEBUG_REG GPIO
DEFINE DEBUG_BIT 5
DEFINE DEBUG_BAUD 9600
DEFINE DEBUG_MODE 1
DEFINE DEBUGIN_REG GPIO
DEFINE DEBUGIN_BIT 4
DEFINE DEBUGIN_MODE 1

rxin var GPIO.3   'input from rc receiver
txout var GPIO.2  'pwm output to driver
rxval var BYTE
adjp var byte
INPUT rxin
output txout

hold:           'wait here if the receiver is not up yet
pulsin rxin,1,rxval
if rxval=0 then goto hold

arm:            'receiver is up now make sure throttle is low
pulsin rxin,1,rxval
if rxval>115 then goto arm

main:           'Throttle is low now start looking for pulses
pulsin rxin,1,rxval
adjp = (((rxval - 110)*5)/14)*10 'normalize the pulses & convert for pwm
HPWM  1,adjp,1000                
debug "Pulsewidth:",#adjp,10
goto main