there is also this define
DEFINE HSER_CLROERR 1
That I didn't have in my program. Does it matter where the define goes? If I'm understanding the manual correctly, I shouldn't have to use this any longer? Also, didn't see it mentioned in the manual but will the define clear RCSTA1 and RCSTA2?

Code:
 IF RCSTA1.1 = 1 THEN    
       RCSTA1.4 = 0          
       RCSTA1.4 = 1
       DAT_IN1 = RCREG1         
       IF PIR1.5 = 1 THEN DAT_IN1 = RCREG1  
    ENDIF
It still won't help my original problem but I'll try lowering the baud rate and see if that helps. If not, I guess flow control is needed.