Justin:
I cannot explain just what the problem is with your ALE line but I think that this scheme you are using has some other issues to deal with too. Using the external RAM space address lines as a data bus will only work as long as ALL 64K bytes of the external address space are not committed to anything else. The 89S8252 processor you are using has an onboard 2K byte EEPROM memory area that you must make sure that you disable before trying to run your external MOVX data/address process.

Here is relevent text from the Atmel data sheet about the EEPROM access:

"The on-chip EEPROM data memory is selected by setting the EEMEN bit in the WMCON register at SFR address location 96H. The EEPROM address range is from 000H to 7FFH. The MOVX instructions are used to access the EEPROM. To access off-chip data memory with the MOVX instructions, the EEMEN bit needs to be set to "0".

Maybe this in some way relates to the problem.
Michael Karas