I have discovered that in my case, during compile, the compiler is removing the empty FOR loop:
for (timer=0; timer <= 4200; timer++);
So essentially, there is almost no delay between writes to PORTB, and that is why the led's look like all are ON dimly.
This seems to be a 'normal' action of the compiler using the MAKEFILE supplied with the kit. Possibly, there is an optimization setting that would eliminate this problem.