RFsolution, The problem is in the "DEFINE HSER_CLOERR 1 ' automatic clear overrun error " statement. PBP clears the error by disabling the port and re-enabling it the same way as using the statement: RCSTA.4 = 0 and then RCSTA.4 = 1. this command set disables the receiver and then re-enables it to clear an overflow error. It's in the data sheet for the processor you are using. To prevent seeing this pulse you should set the output pin's state to normally high before using it as an input for the usart mode.

Dave Purola,
N8NTA