>>
*** the TMR0 register is just RANDOMLY changing ****
I can see no sequence in the numbers at all. They appear to just change at
will on every instruction.

When I run this in the simulator all is well and I get the TMR0 register
changing as expected.
So why NOT on the real hardware???
<<

How are you "seeing" timer 0 values on the real hardware?  With the in
circuit debugger I perhaps?  I'm not familiar with the in circuit debugger
since I use the ICE, but doesn't that thing execute code on the target for
each "single step"?  If so, that would explain the additional timer 0
increments.  Timer 0 behaves very nicely with the ICE.


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