I know I'm missing RI interrupts because, for diagnostics, in the ISR I output an incrementing value to a port with LEDs on.

One further bit of progress, I've tried reducing the baud rate to 57600 and that works. However, I just can't see how the baud rate should lock the receiver up, surely it should just cause bad data or framing errors if there were a performance problem. The fact that only two characters are required to cause the lock up doesn't suggest that the problem is one of performance. The port is double buffered so I should be able to receive while reading.

The SMOD bit is clear btw so invalid stop bits should be ignored. I can't see anything else in the datasheet that would prevent receive interrupts other than disabling the receiver or interrupt and I'm not doing either. (The transmitter still works so the interrupt is definitely still enabled.)

I've tried changing the order of reading byte and clearing RI flag, I've also tried increasing the priority of the interrupt but still no joy :-(