Inner loop distroy the LSB count value on R7 after the fist count of the outer loop. Method to preserve and restore the LSB count when the inner loop finish should be added
Suggested soln 1:
Delay:
;; here
mov r5,r7
loop: djnz r7,loop
mov r7,r5
djnz r6,loop
ret


or suggested soln 2:
Delay:
;; here
outerloop: push ar7
loop: djnz r7,loop
pop ar7
djnz r6,outerloop
ret


Ofcourse the number of cycles consumed in the delay subroutine should be recalculated.

Happy ASM programming!
73,Li.