On the AtariAge forums, lucien2 found a problem with byte initilizers. Apparently this sequence:

li r1, >8C02
li r2, >D00
movb r2, *r1
li r1, >8C02
li r2, >8700
movb r2, *r1

was converted into this one, destroying the >0D value.

li r1, >8C02
li r2, >FF87
movb r2, *r1
swpb r2
movb r2, *r1

This was caused by not masking the values together before ORing them into the second constant. In this case the sign extended bits of >87 were stomping on >0D, resulting in a corrupt value. I'm posting the two-liner patch on the forum.

He also found another problem using -O0, which I usually avoid. The register I chose for the frame pointer, R8, is volatile. That means that it can be destroyed over a function call. This was just a dumb mistake. In order to preserve the ABI interface, I've moved the frame pointer to R9, which is preserved across function calls. The resulting code looks much safer now.