Why do you do this?

ORL TH0,#0DCh ;reload timer 0 for 10 ms
why not
MOV TH0,#0DCh ;net result is the same but doing a MOV is more obvious as to what you want to do.

Also the method of generating pwm by a rotating 16 bit register is interesting. What happens when you load a new value into PWM1? There is no way of synchronising the change therefore you will get a glitch. Not good practise. A simple way for doing a 8 bit pwm is to have a variable that increments each time tick. Then you compare the width variable with the time tick variable and set/reset the output bit depending on the result. For synchronisation you can update the width variable when the time tick count = 0. There are other methods you can try - do a search. Note that your method only gives a pwm granularity of 1 in 16.