Hi all,

Working at last...... the problem was reversed Tx and Rx, just as Ioannis suggested above. I was misled by incorrect markings on the prototype board I got from Ciseco. Also, I corrected the define caps, although this did not seem to be a problem because the leds were blinking at the right speeds.... thanks for the tip Robert. You guys are very patient to stick through this ... I salute you. Final code here:

Code:
'**************************************************************************
'*Program to test XRF radio communications via loopback method            *
'*Uses a pushbutton switch on porta pin 4                                 *
'*Target processor is PIC 12f1822                                         *
'*207 program words, revised 05/08/2013                                   *
'*Program by Dick Ivers                                                   *
'*All rights reserved                                                     *
'************************************************************************** 
'set 12f1822 configurat1on
#CONFIG
  __config _CONFIG1, _FOSC_INTOSC & _MCLRE_OFF & _CLKOUTEN_OFF & _WDTE_ON
  __config _CONFIG2, _PLLEN_OFF & _LVP_OFF
#endconfig

'set registers
        OSCCON = %01111000   '16 mhz osc
        OSCTUNE = 0          'factory calibration
        ANSELA = 0           'all digital inputs
        OPTION_REG.7 = 0     'global pullups enabled
        WPUA = %010010       'porta pin 1 and pin 4 weak pullups enabled
        CM1CON0.7 = 0        'comparator disabled
        TRISA  = %011110     'porta.0 & porta.5 are outputs, all others input

    while OSCSTAT.0 = 0      'wait for stable freq.
    wend
    
    DEFINE OSC 16            '16 mhz oscillator


'Define debug parameters 
DEFINE DEBUG_REGG PORTA        'set debug port to porta
DEFINE DEBUG_BIT 0             'use pin ra0 of porta for debug
DEFINE DEBUG_BAUD 9600         'set baud rate to 9600
DEFINE DEBUG_MODE 0            'communicate in true mode

DEFINE DEBUGIN_REGG PORTA      'set debug port to porta
DEFINE DEBUGIN_BIT 1           'use pin ra1 of porta for debugin
DEFINE DEBUGIN_BAUD 9600       'set baud rate to 9600
DEFINE DEBUGIN_MODE 0          'communicate in true mode

    i var byte
    char var byte

    For i = 1 to 3
    porta.5 = 0              'led on
    pause 333
    porta.5 = 1              'led off
    pause 333
    next

asleep:
    nap 2   'delay 4 ms
    if porta.4 = 1 then asleep
 
DT:
    debug 55
    debugin 100,blink,[char]
    if char = 55 then
     porta.5 = 0            'led on solid
     goto halt
    endif    

blink:
    porta.5 = 0             'led
    pause 500
    porta.5 = 1             'led off
    pause 500
    if porta.4 =1 then asleep
    goto DT   
   
halt:
    stop                   'led stays on