Did you wonder why your code looks like this?
OCR1A = 207;// = (1610^6) / (96008) - 1 (must be <256)
It's because you didn't put code tags around your code:
[code]
OCR1A = 207;// = (16*10^6) / (9600*8) - 1 (must be <256)
[/code]
... so it looks like this when you click Preview:
OCR1A = 207;// = (16*10^6) / (9600*8) - 1 (must be <256)
This is explained in How To Use the Forum.
And I hope your code is indented properly. Without code tags, all the leading spaces are removed. Type control-T in the IDE editor to format it before posting.
To answer your question, you must use the volatile attribute on variables that are shared between interrupt routines and non-interrupt code (e.g., loop or anything called from loop).
volatile int timer;