The LFXO and LFRCO was not available in EM2. It was available in EM3. The TIMER need HF clock and that's the reason they could not work under EM2.
Sorry I did not catch your point here:
The output toggle must be enable for the interrupt to occur, even if you are not physically toggling a pin
by the way, it looks an 10mS interrupt (with LETIMER clocked by 32.768kHz). i am wondering if you have tight accuracy requirement on the 10mS. The 32.768kHz was not divisible by 100Hz (without remainder). you may get some period close to 10mS but exact 10mS.