Still Debugging after failing is strange. There is something else being introduced corrupting your instructions.

Use the Addr variables and see what happens when it free runs:
Code:
x VAR BYTE
RD_Addr = $37
WR_Addr = $36

Main:
High Led : Pause 500: Low Led : PAUSE 500
    I2CWRITE SDA,SCL,WR_Addr,[LOC],Fail1
    I2CREAD SDA,SCL,RD_Addr,[VALUE] ,Fail2
    PAUSE 25
    DEBUG  Value,13,10
    PAUSE 250
    DEBUG "Done....",13,10
    
WHILE 1 : WEND
Goto Main

Fail1:
FOR x = 0 TO 10
    toggle portc.2 : pause 50
NEXT x 
goto main

Fail2:
FOR x = 0 TO 10
	High Portc.2 : Pause 250 : Low PortC.2 : Pause 250
NEXT x
GOTO Main
Going to church now, BBL