1)If You try Your pen/paper setup again , You will find that on every access (in Your infinite loop) SCLK forms 15 bits in RESET envelope.
2)Draw timediagrams , generated by code, and compare with holteck's behavior.
3)See below what changes i suppose:

//******************************************************************* 
//FUNCTION THAT SENDS ADDRESS OR DATA_IO AFTER CONVERTING IT TO BITS 
//******************************************************************* 
void convert_and_send(unsigned char hex_data1) 
{ 
bit sending_bit; 
unsigned char comparing_byte=0x01; 
unsigned char i; 
unsigned char storing_byte=0x00; 
SBUF=hex_data1; 
usec_wait(5); 

for(i=0;i<8;i++) 
{ 
storing_byte=(hex_data1&comparing_byte); 
if(storing_byte==0x00) 
sending_bit=0; 
else 
sending_bit=1; 
//zzzzzzzz omit SCLK=0; 
SCLK=0; 
DATA_IO = sending_bit; //Clock to DATA_IO delay is 250ns (max) 
comparing_byte<<=1; 
SCLK=1; //data entered on rising edge !!!
SCLK=1; //added zzzzzzzzz
SCLK=0; /added  zzzzzzzzzz
DATA_IO = 1 //added zzzzz HOLTEK code keeps data io LOW too
            // for 8051 is needed HIGH
} 
serial_storage=0x00; 
usec_wait(2); 
} 


//************************************************************************************** 
//FUNCTION THAT RECEIVES DATA AND THEN CONVERTS IT TO CHARACTER AND PASSES TO ITS CALLER 
//************************************************************************************** 
unsigned char receive_convert(void) 
{ 

bit receiving_bit; 
unsigned char comparing_byte=0x00; 
unsigned char i=0; 
unsigned char received_data=0x00; 

DATA_IO=1 ;//added zzzzzz

for(i=0;i<8;i++) 
{ 
SCLK=1; 
SCLK=1; //For giving a DEALY 
SCLK=0; 
SCLK=0; //added zzzz  DATA outputed on FALLING edge 

receiving_bit=DATA_IO;

if(receiving_bit==0) 
comparing_byte=0x00; 
else 
comparing_byte=0x80; //comparing byte is 10000000 as the bit is to be placesd in the MSB position 
received_data=received_data>>1; 
received_data=received_data|comparing_byte; 
} 
return(received_data); 
} 


 

regards