LED doesnt turn ON (or OFF)

Grumpy_Mike:
You don't need all the for(;;) { rubbish. Just put the code in the loop() function, that will repeat it for ever.

Why are you using direct port addressing?

PORTB &= (1 << LED);

Will set a bit in PORTB that is a 1 shifted to the left 13 times. As this is only an 8 bit register this does nothing for you.

Why did you not post all the code so we can see if you have set the data direction register in the setup?

Thanks for reply.
I have posted an URL from where you can download the source code in one file.
The thing is that I tried to change the main to loop, but it stopped compiling, saying that there are some errors with __vector_18.

I have tried changing the code like this:

PORTB &= B00100000;
for(i = 0; i < pause; i++)
	_delay_us(10);
PORTB |= B00100000;
for(i = 0; i < 255-pause; i++)
	_delay_us(10);

The same problem, it turns on but doesnt turn off.