"Most compilers permit bit variables."

That should be, "Most 8051 compilers permit bit variables." - it's definitely not an ANSI thing!

Bit_Zero_of_Your_Byte = P1_3; 
Bit_One_of_Your_Byte  = P1_2; 
Bit_Two_of_Your_Byte  = P1_7;

Yes, that's the way I'd do it in Keil C51!