A simpler way would be to read eight bytes at a time and assemble the ascii from the low order bits, something like:
char inputBuffer[8];
char temp;
FILE* binin;
int i;
binin = fopen("ctest.txt", "rb");
if (binin == NULL)
exit(1);
do
{
int nIn = fread(inputBuffer, sizeof(char), sizeof inputBuffer, binin);
if (nIn < sizeof inputBuffer)
break;
temp = 0;
for (i = 0; i < 8; ++i)
{
temp |= (inputBuffer[i] & 1) << (7 - i);
}
printf("%c", temp);
} while(1);
printf("\n");