Yes, it's not very likely that the PIC is running faster than 32MHz.
There's two parts to it. Get the PIC to actually run at the desired frequency and inform the compiler what that speed is so it can get its timing calculations correct. If you don't tell the compiler that you're running the PIC at 32MHz it defaults to 4MHz and your PAUSE 1000 will in effect become a PAUSE 125.

/Henrik.