The directive FOSC_INTOSCIO means that the part is using its internal oscillator, and the lines normally used for the crystal are set as I/O lines. That's why your crystal isn't oscillating.

This device has an internal oscillator frequency of approximately 4MHz, so it's quite possible that your ISR is executing faster than your eye can perceive the LED flashing.

You will want to use something like LP_OSC instead of FOSC_INTOSCIO (I don't have that exact header file, so I cannot tell you which exact one to use).