No, HSERIN/HSEROUT does not do handshaking automatically, in the background.
The UART in the PIC can receive one byte/character (and almost a second full byte/character) without the code doing anything but when that byte/character is received the code must fetch the byte from the receive buffer. This is where interrupts come in but you you were quite clear you didn't want to go that route - and frankly, it should not be needed for this.

And again, using HSERIN with a WAIT statement in place of DEBUGIN will gain you pretty much nothing.

Can you post the '88 code for us to take a look at, I'm sure you'll get plenty of suggestions on how to improve it.

/Henrik.