Sorry guys, above code has a few syntax errors and bad comments :(

Here is the correct code:
if (bit_addr & 80h)
{
// upper 128 bits, those are in SFRs
byte_addr = bit_addr & 0F8h;
}
else
{
// lower 128 bits, in the bit addreseable area 20-3Fh
byte_addr = (bit_addr >> 3) + 20h ;
}
bit_pos = bit_addr & 7;
bit_pos = 1 << bit_pos; // This is the bit mask
// And byte_addr contains the byte address, you can use R0 or R1 to access it indirectly, and the bit mask to operate on the actual bit.

girish