Watchdog is disabled at the main(). Surely, there is still a chance that the watchdog fires before the MCU execution reaches to the main(). But he said it goes to "EA = 1;" over the watchdog disable (PCA0MD &= ~0x40;).

Rather, the UART interrupt is enabled but no UART ISR is supplied.

void Timer1_Init (void) 
{
    ...
    ES0 = 1; // Enable UART0 interrupts 
}

void main (void)
{
    ...
    PCA0MD &= ~0x40; // WDTE = 0 (clear watchdog timer enable) 
    ...
    Timer1_Init();
    EA = 1;
    TI0=1;
}

Another point is,
- printf is used but no putchar() is implemented.

Tsuneo