1st, I say you may get better support over on the chipkit forum as the folks here tend to not be as familiar
with the pic32 environment.
What you are seeing is that there is AVR code in your servo library code and it obviously
fails when compiling for the pic32 processor.
You definitely have an old mpide release.
I looked in my 0022 mpide release (from Aug 2011 vs your May 2011) in and my servo library does not have any AVR code in it.
But there is a more recent version of mpide.
Rather than figure out what is wrong with release you have, go get the 0023 version
there were many fixes and updates since the mpide 0022 release.
--- bill