delays break Timer1 and MsTimer2

I was trying this code, and with some help from the people at #arduino channel @ freenode I found that the delay function breaks the mstimer2, I tried also the timerone and the same error.

#include <MsTimer2.h>

// Switch on LED on pin 13 each second
long time = 200;

void flash() {
  //
  digitalWrite(13, HIGH);
  digitalWrite(12, HIGH);
  delay(100);
  
  digitalWrite(13, LOW);
  digitalWrite(12, LOW);
  Serial.println("Flashing");// debuging purposes
}

void timesetup(int t) {
  MsTimer2::set(200, flash); // 500ms period
  MsTimer2::start();
  
  
  
  
}
void setup() {
  pinMode(13, OUTPUT);
  pinMode(12, OUTPUT);
  Serial.begin(9600);
  timesetup(500);
  
  
}

void loop() {
 // timesetup(time);
  //long rcv = 200;
  //Serial.read(rcv)
  
  //if (rcv != time); 
  //{ 
    //timesetup(rcv);
    //time = rcv;
  //}
  
}

please, give your thoughts, the delay is at the flash function.

the error is that the led lights up, but doesn’t blink, even once.

What does this do:
[UNTESTED CODE]

#include <MsTimer2.h>

// Switch on LED on pin 13 each second
volatile boolean doBlink = false;

void flash() {
doBlink = true;
}

void timesetup(int t) {
MsTimer2::set(200, flash); // 500ms period
MsTimer2::start();
}

void setup() {
pinMode(13, OUTPUT);
pinMode(12, OUTPUT);
Serial.begin(9600);
timesetup(500);
}

void loop() {
if(doBlink){
digitalWrite(13, HIGH);
digitalWrite(12, HIGH);
delay(100);
digitalWrite(13, LOW);
digitalWrite(12, LOW);
//Serial.println(“Flashing”);// debuging purposes
doBlink = false;
}
}

thank you for the idea, but I'm not seeing what is the difference in real, since the code is really far from what I wanted to do. I don't want to have delays at the main loop, and I already solved the problem using a counter triggered by the timer. Anyway the post was to show that the delay() was messing up with the mstimer2. so I lost more tha 2 hours to find that.... it is only a warning :)

If you got a solution, why not post? :)

BTW: the purpose was to make the ISR as short as possible.

here is the solution, and a video showing the result

http://www.arduino.cc/cgi-bin/yabb2/YaBB.pl?num=1240926680