void ds1307_display()

[Ttelmah]

It won't....

You do realise the clock has to be initialised before it can run?.

The time needs to be set into the chip, and the CH bit (bit 7 of the seconds register), needs to be cleared _before_ the chip will start giving a time. You can't just read it and expect to see a time.
As the chip wakes from 'new', the clock is disabled.

Realistically also, the update rate needs to be a lot slower. 50mSec is not enough loop delay to allow the LCD to draw.

Also the I2C setup should be:
#use I2C(master, I2C1, SLOW = 100000)

Your chip does not support the fast protocol, so needs to use SLOW.