During the thread of this ongoing discussion, it seems that no-one has mentioned
the alternative approach to this problem - so here is my penny/dollar/ECU/francs
worth -

I had been working on a couple of projects which required ACCURATE timing and
encountered all these same problems - albeit with the ST6 series of controllers
- continual software overheads causing innacuracies in timing. Eventually I
decided to drop the idea completely and wired up a PXO (Programmable Xtal
Oscillator) chip to give me an interrupt on one of the port pins. Voila - no s/w
overheads, a clock the beats continually, hundreds of hours programming time
gained and a plus - if you wire up some spare i/o to the PXO, you can change the
frequency as well. Yes, I know it's cheating and it costs more - but for the
sake of one 16 pin chip - you know it makes sense :-)