Hello Jack,
The problem you have encountered is because the TIM channel output becomes active when the counter reaches the TMOD value. This means that, when the channel value is set to zero, the pulse width will actually be one TIM clock period, as you have observed. The channel value should be set to one less than the pulse width that you require.
The way to achieve zero duty cycle is to clear the TOV bit within the TSCn register.
Note that, if you require a PWM period of 125 (0x007D), the TMOD setting will need to be 124 (0x007C). With your present setting, the PWM period will be 126.
Regards,
Mac