ElectroNick:
The timer seems a bit off (actually, runs twice as fast as far as I can tell) but that's a 128kHz oscillator, I haven't looked at the prescaler and also, it may just be very inaccurate. I'll look into it later.That was pretty much it!
Anyhow, great job, smeezekitty!
This could be a bug.
The 128khz oscillator is inaccurate but not that inaccurate. Its about +- 30%.
It seems to run about the correct speed here although I have not tested it on Linux or Arduino 1.0.
Please post the code you used to make it blink.
I will investigate this further.