1. the gotcha of the sector erase command is in the insufficient description in the datasheet. DPTR should contain the address of the first byte in the sector to be erased, i.e. if you want to erase sector 0x1380-0x13FF, you should fill DPTR by 0x1380 before calling the sector erase command.

2. where are your erase routines located in the code memory (I suspect this is a part of a longer bootloader, you might perhaps tell us why are you trying to write your own bootloader instead of using the default one)? Aren't there any interrupts active when you are trying to erase the FLASH?

3. To post code, please click on the "Insert Code" button on the bottom of the edit window, and place code in between. Please use the "Preview" button to check if your code is properly indented. There are also hints to this in http://www.8052.com/faqs.phtml?FAQ=120199.
The same, and more, is described in Jon Ledbetter's "Guide to 8052.com". Thanks.

JW