As I am not a C-programmer:

could you explain following:

sbit LCD_RS = 0x0B1; //Register Select line = port 3.1
sbit LCD_WR = 0x0B3; //Read/Write line = port 3.3
sbit LCD_EN = 0x0B5; //Enable line = port 3.5
sfr LCD_DATA = 0x080; //Data bus = port 0
sbit busy = 0x087; //busy bit = db7
sfr KEY = 0x0A0; //INPUT PORT 2

Are you sure that you are addressing bit # 1 of byte B0 (port3 sfr, bit #1) if you say "sbit LCD_RS = 0x0B1" and not adressing address 0X0B1....

Same applies to other sbit definitions.

I could be totally wrong of course, as I said in my opening remark....

regards
Patrick