Your current problem has nothing to do with C or interrupts: you are referring to a register (TCCR2) that doesn't exist. Your options are TCCR2A, TCCR2B, or TCCR2C. Look at the mega168 datasheet (the timer2 registers section) to see what they do and which one to use (hint: I think you want to replace TCCR2 with TCCR2B).
- Ben