Are you saying that you have two 32768 crystals?
The CPU will be running at 8192 hz (FOSC/4).

You might as well run the timer off the main clock then, (saves the power used by the timer1 oscillator), and gives the same accuracy.
T1CON = 1
Reload TMR1H with $11100000, and definitely put it First in the handler.

And change the LCD timing because PBP still thinks it's running at 4mhz.

DEFINE LCD_COMMANDUS 17
DEFINE LCD_DATAUS 1