No 65khz does not sound right, and ...
It doesn't throw you to the error label because it always reads 0's on the pin.

An ack from the device is a low pulse. As long as it sees a low when it expects an ack, it will never jump to the label.

OK, it's time for you to pony up some of the info you've been leaving out.

What are your CONFIGs?
What cyrstal are you using?
What DEFINE OSC are you using?
What pins are the SCL and SDA on?

And the rest of the code.
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