Hi Tom,
you should use MODE 1 to configure your serial port as 8-N-1. Rest is ok with you I guess.
Also, if your cable contains the level translators required then, go ahead, you can use it but make sure you have the NULL-MODEM cable (and the DB-9 connected to your P3.0 and P3.1 and GND at Pins 1,2 and 5 of DB-9).
Regards,
Harsha