Code:
TRISB   = %00010000 'Data Direction Control Register (Input/Output)

T0CON   = %11000111 '16-bit mode enabled  ?????  how do you figure that

Define OSC 4 ' external oscillator
from data sheet


REGISTER 12-1: T0CON: TIMER0 CONTROL REGISTER

bit 6

T016BIT: Timer0 16-Bit Control bit
1 = Timer0 is configured as an 8-bit timer/counter
0 = Timer0 is configured as a 16-bit timer/counter