No, this is what I was alluding to. Look at the following code. When we hit the Timer ISR we get to the line that says "jnb finished,$ ;wait for complete event to finish". However, 'finished' is set in a different ISR (LightGate2:). Because we're already servicing the Timer interrupt we will never set 'finished', because you can't service an interrupt while you're already servicing an interrupt. That's why David's code won't go past that line.

Timer:
	mov TH0,#220		; prepare timer registers
	mov TL0, #01
	mov TMOD,#01H 		;Timer 0 mode 1
	clr TF0 		;clear timer interrupt flag
	mov timerOverFlow,#0 	;clear overflow counter
	setb EX0 		;enable external interrupt 0
	setb ET0 		;enable timer interrupt 0
	setb EX1 		;enable external interrupt 1
	setb EA 		;enable global interrupt


	jnb finished,$ 		;wait for complete event to finish   <---------PROBLEM LINE


	clr finished 		;clear event bit
	sjmp Timer 		;prepare for next event




LightGate2:
	clr TR0 ;stop event timer
	setb finished ;event finished (finished is defined in 0h) 
reti