Hi,
I tried to compile the code, specifically:
Code:
#CONFIG
  __config _CONFIG1, _FOSC_INTOSC & _WDTE_OFF & _MCLRE_ON & _CP_OFF & _CLKOUTEN_OFF & _PWRTE_OFF & _BOREN_OFF
  __config _CONFIG2, _LVP_OFF & _LPBOR_OFF
#ENDCONFIG

#define OSC 4

OSCCON=%01101000 ' 4MHz internal
TRISC=0
PORTC=0
LED0 var PORTC.0

Start:
LED0=1
Pause 500
LED0=0
Pause 500
Goto Start
And it compiles and assembles for the 16F1509 without any error messages or warnings using PBPX 3.0.7.4 and MPASM 5.45.
What version of MPASM are you using?

As for the DEFINE vs #DEFINE.... Yes both are valid but different and in this case you DO want DEFINE OSC 4 - without the # - but it's not related to the error message you get.
See section 2.3.3 (DEFINEs defined) as well as section 4.10 (#DEFINE) in the manual.

/Henrik.