Yes, PULSOUT is a blocking command. As are PWM, SERIN(2)/SEROUT(2), POT, and so on.
Basically, anything that 'bit-bangs' a function is a blocking command. Nothing else can happen until that command is done.
I'm with you on this one... Send out your servo position data to a 2nd PIC via serial (or whatever) and have that 2nd PIC handle the servo positioning. There are a bunch of boards out there that do exactly that...can't think of any off hand, but I know I've seen them a bunch of times...
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