1 sec delay using PIC18F TImer 0
According to what you described the timer clocks at 2MHz. That is equivalent to 500nsec per tick of the timer.

When you program the timer to 64536 you are specifying that the timer should count for 1000 cycles before timing out. 

1000 cycles at 500 nsec per cycle = 500,000 nsec = 500 usec

So in your while loop where you are trying to toggle the port pin to flash the LED the DelayMs() call is giving your LED a cycle time of 1 msec (500 usec off + 500 usec on).

With the LED flashing at 1msec rate (a.k.a 1kHz) the LED will appear to be on all the time!! 

If your real goal was to have the LED on for 0.5 second and off for 0.5 second then you will need to increase your delays by 1000. So put each of the calls to DelayMs() within your while loop inside a for loop that would iterate the delay 1000 times.