I have also simulated this in Keil, and everything seems to work fine there.
Can your processor (I refuse to use Atmel) be configured as to the nature of the port pins. If so, are they (T0 and int0) configured "pseudo-directional". If your Int0 pin is configured push-pull and you have grounded it, you have probably blown the chip. Same could be the case for the T0 pin, at least, if is is configured pp there will be no input. I doubt a simulator would pick up on this.

I see no 'reason' for your problem, the above is 'best guess'

Erik