Hi Ken,
Don't confuse Interrupts with Subroutines which fundamentally are (or should be) rather different. However, interrupts with a PICaxe are a poor imitation of how interrupts would normally be used. Only polled by the operating system (so not necessarily very fast), only one entry point (label), no access to the/a Stack, "nesting" not possible, etc.. Also, for simplicity, PICaxe tends to use PAUSEs where more "serious" programming would use status flags (to prevent actions being attempted "too soon").
Of course you can construct your programs any way you wish (or can make work) but to me, the statement above
"Once into an interrupt it stops all other tasks" is a very good reason to exit the interrupt routine as soon (or quickly) as possible ! But also beware that when a PAUSE is interrupted then any remaining time of that pause is
not executed after the RETURN (Manual 2, page 216).
My reference to mixing PAUSE with multi-tasking concerned the discussion in the thread that I linked in #2 above. You didn't say where "the manual states...", but anyway I'm not going to attempt to "defend" the manual since there is a very recent thread where several of us have been "commenting" about inaccuracies in the manual(s). Also, single statements often need to be taken in context.
Cheers, Alan.