Donald,
I'm not sure if it's the case will all 'c' compilers for the 8051 - but with the IAR if you don't have vars used in the interrupt service routine as globals or static then the var is stored in the temp variable pool and can be corrupted( or corrupt other vars). This is also the case with the imagecraft ICCAVR compiler for the AVR.

I couldn't see anything else obvious that may have explained the problem.