I opted for hardware driven sleep mode (SM=1) in the XBee. I felt that that cyclic sleep mode (SM=4) to be a pain to setup. I felt that that keeping the XBee asleep for extended durations, the device would be MIA from host. With a hardware based sleep, I could use a swith to to force  it awake, configure remotely with the software tool I wrote, flick the switch back to the timer based sleep. Simple in my mind.

The tested scenario is illustrated below and it worked as planned. The XBee would be taken out of sleep for 30 ms and back to sleep for 100 seconds. As stated earlier, the power consumption does not lend itself to using batteries.

I found this link for an alternative to the 555 and will look into it.  I would also not require a level shifter and can operate from a single 3.3 battery. This would surely extend the battery life as it would remove the dependency on the 78L33 and 555.  Now I just need to deal with the LM35 and other sensors and I think I have a way to deal with that and that is to keep them “offline” when sleeping. More experimentation.