If you look in the manual under HPWM. You can see that pbp HPWM is only 8bits.
In your code you have the duty set at 254, which is nearly 100%. I think you would want to set
the duty to 50% or 127.

untested
Code:
TRISC.2 = 0
MAIN:
	HPWM 1,127, 38000 ' duty cycle 50% 
              pauseus 1000
              HPWM 1, 0, 38000 ' duty cycle 0
              pauseus 1000

	GOTO MAIN