MPASM don't work with DEVICE, you MUST use __CONFIG and it's related syntax.

Have a look at the faq, always the same link
http://www.picbasic.co.uk/forum/showthread.php?t=543

For the config deprecated stuff, you may edit your INC file OR just insert the following line..
@ ERRORLEVEL -230
at the top of your code.

As soon as possible, i'll suggest you to update your PBP to 2.50