Hi,
CCP1 is fine, I just used CCP2 because that's what you used in your previous post.
The fact that you're getting 31.25kHz indicates that the PLL isn't active. You should get 125kHz which is 4 times (ie the PLL ratio) of what you're actually getting. I'm not SURE that's what's happening and I'm not sure WHY - if that's case.

One thing, which isn't related to the problem: You should always tell the compiler which oscillator speed you intend to run at so that it can calculate the correct values for things like PAUSE and so on. In this case
Code:
DEFINE OSC 32
This does in no way SET the frequency, it just tells the compiler how fast you INTEND to run.

Next thing, your program doesn't end anywhere, it'll continue to execute thru blank program memory until it reaches the end at which point it'll start over. Maby that's got something to do with it. Put some infinity loop at the end like
Code:
DoItForever:
TOGGLE PortB.0
Pause 10
Goto DoItForever
Using the above infinity loop will also allow you to verify if the PIC is actually running at the intended 32MHz by looking at the signal comming out of PortB.0, or whichever pin you like.

Apart from that I can't really see what might be wrong.

/Henrik.