(ok, I tried the "obvious" replacements of 0 --> 1 in code statements having to do with the timer, and actually loaded the code on a real arduino board. It DOES work, although it looks like the blink is running about half the speed that is expected (2s or so on and off.) A good excercise in debugging, left to the student 
(Note that the three timers on the ATmega168 are each slightly different...) Let me know if you get stuck, and I'll post the code...)