Hi,

DT's Elapsed Timer takes care of setting T1CON right in the "StartTimer" . If by any means T1CON oscillator is turned on then PORTC.1 becomes an input regardless of the TRIS settings. Still it does not explain why and how the PWM starts when Timer1 is started.

What happens when your PWM stops the pin in set low/high ?
I hope you are quite aware that if duty cycle is higher than period then the pin never gets cleared.

Mr.E where is your crystal ball ??!!??