Streamlined code even more:

Code:
#CONFIG
    __config _CONFIG1, _FEXTOSC_OFF & _RSTOSC_HFINT32 & _CLKOUTEN_OFF & _CSWEN_OFF & _FCMEN_ON
    __config _CONFIG2, _MCLRE_ON & _PWRTE_OFF & _LPBOREN_OFF & _BOREN_ON & _BORV_LO & _ZCD_OFF & _PPS1WAY_OFF & _STVREN_ON & _DEBUG_OFF
    __config _CONFIG3, _WDTCPS_WDTCPS_11 & _WDTE_OFF & _WDTCWS_WDTCWS_7 & _WDTCCS_LFINTOSC
    __config _CONFIG4, _WRT_OFF & _SCANE_available & _LVP_OFF
    __config _CONFIG5, _CP_OFF & _CPD_OFF
#ENDCONFIG

DEFINE OSC 32

define  CCP1_REG     0              ' Must clear unused CCP pins or else unpredictable results
DEFINE  CCP1_BIT     0
define  CCP2_REG     0
DEFINE  CCP2_BIT     0
DEFINE  CCP3_REG    PORTB
DEFINE  CCP3_BIT     5
define  CCP4_REG     0
DEFINE  CCP4_BIT     0
define  CCP5_REG     0
DEFINE  CCP5_BIT     0

ANSELA = %00000000
ANSELB = %00000000
ANSELC = %00000000
ANSELD = %00000000
ANSELE = %00000000

TRISA = %00000000
TRISB = %00000000
TRISC = %00000000
TRISD = %00000000
TRISE = %00001000

PinSCL2     VAR PortB.1
PinSDA2     VAR PortB.2

    HPWM 3, 8, 1953

addr        var byte : addr      = %01000000        ' $40

IOCONAreg    var byte
IOCONBreg    var byte
IODIRAreg    var byte
IODIRBreg    var byte
OLATAreg     var byte
OLATBreg     var byte

IOCONdat     var byte
IODIRdat     var byte
OLATdat      var byte

IOCONdat  = %00110000
'   bit 7   0 = The registers associated with each port are separated into different banks.
'   bit 6   0 = The INT pins are not connected. INTA is associated with PORTA and INTB is associated with PORTB
'   bit 5   1 = Sequential operation disabled, address pointer does not increment.
'   bit 4   1 = Slew rate disabled
'   bit 3   0 = Disables the MCP23S17 address pins.
'   bit 2   0 = Active driver output (INTPOL bit sets the polarity.)
'   bit 1   0 = Active-low
'   bit 0   Unimplemented: Read as ‘0’

    if IOCONdat.7 = 0 then      ' Bank=0
        IOCONAreg  = $0A
        IOCONBreg  = $0B
        IODIRAreg  = $00
        IODIRBreg  = $01
        OLATAreg   = $14
        OLATBreg   = $15
    else                        ' Bank=1
        IOCONAreg  = $05        
        IOCONBreg  = $15
        IODIRAreg  = $00 
        IODIRBreg  = $10
        OLATAreg   = $0A
        OLATBreg   = $1A
    endif

IODIRdat = %00000000                                   'set GPIO all output

    I2CWRITE PinSDA2,PinSCL2,addr,IOCONAreg,[IOCONdat]
    I2CWRITE PinSDA2,PinSCL2,addr,IODIRAreg,[IODIRdat]

    I2CWRITE PinSDA2,PinSCL2,addr,IOCONBreg,[IOCONdat]
    I2CWRITE PinSDA2,PinSCL2,addr,IODIRBreg,[IODIRdat]

LOOOP:
    OLATdat    = %00000000                             ' LEDs ON 
    I2CWRITE PinSDA2,PinSCL2,addr,OLATAreg,[OLATdat]

    I2CWRITE PinSDA2,PinSCL2,addr,OLATBreg,[OLATdat]

    pause 200

    OLATdat    = %11111111                             ' LEDs OFF 
    I2CWRITE PinSDA2,PinSCL2,addr,OLATAreg,[OLATdat]

    I2CWRITE PinSDA2,PinSCL2,addr,OLATBreg,[OLATdat]

    pause 200

    GOTO LOOOP
end
No longer need to mess with comments to change BANK setting. I just flip bit in IOCONdat and IF takes care of the rest.

Quadruple checked everything, still no blinky blink.