I do not know why it is not executing the ISR. How could I test this better.
if TF0 get set, your problem is in the interrupt enable/vector etc., if not the problem is related to the timer. Have a look in your emulator.
Will this work?
you state above that it does not but I see nothing wring with it EXCEPT you should include using 1 in the ISR, I can see many register cases of overwrite with your code.

Erik