ATtiny85 AC Phase Control for dimming a light bulb
So I think there were (was?) two issues.

1) Pin change interrupts on the Attiny85 are triggered on rising and falling edges which I think was causing the flickering. 

I changed the code to rising edge only triggering: 

ISR(PCINT0_vect){ //interrupt looking for zero crossing
        if (digitalRead(4) == HIGH){
                TCNT1 = 0;   //reset timer - count from zero
                OCR1A = level;
                TCCR1 = B00001011;// prescaler on 1024, see table 12-5 of the tiny85 datasheet
       }
}


2) Attiny85 #reset pin. Pulled that guy high with a resistor. 

Anyways, here's the oscilloscope and dimming led blub video: youtube