Thanks again Jerson for your help on this.
I implemented your suggestions by keeping TMR0 disabled during the MAIN and Interrupt Service Routine until just before the IF-THEN block starts checking for pulse inputs from the FlowMeter. However, I see no changes in the current flow on PowerUp or on return to SLEEP after the ISR......350 microamps in both modes. I have included my latest code that includes these changes so you can see how I did it. If I didn't do it right, please advise.
Still very frustrated on solving this problem.
Code:
' -----[ Device Declaration ]----------------------------------------------
' For MSASM assembler use following:
@ __config _INTRC_OSC_NOCLKOUT & _BOR_SBODEN  & _WDT_OFF & _MCLRE_OFF & _CP_OFF
' The above config  is inteded to set CONFIG = %0000110111010100 for hex 0DD4 or
' FCMEN on (1), IESO on(1), BOREN (01), CPD off (1), CP off (1), /MCLR is  
' digital input (0), /PWRTE off (1), WDTE off (0), INTOSCIO (100).   
  
' -----[ Revision History ]------------------------------------------------
' Version 1.0.7 on 6/21/09: Eliminated @ NOP in MAIN; Reformated Port
'                           Assignments list; Changed IntCloc from 4 to 1 MHz;
'                           WDT_OFF and comparators off to save power.
' Version 1.0.8 on 6/22/09: Changes to MAIN to minimize power during Sleep:  
'                           Set BOR_SBODEN; set PCON.4 =0; ANSEL =%11110011, 
'                           TRISA = %00001101..Set RA0, RA2 & RA3 as inputs in 
'                           MAIN before SLEEP permits return to SLEEP after ISR.
' Version 1.0.9 on 6/25/09: Moved INTCON statement to just before SLEEP in MAIN.
' Version 1.0.10 on 6/27/09: Delayed turning on TMR0 until after Flush interrupt
' -----[ Declare Variables & Aliases ]-----------------------------
'
diff    VAR Byte      ' Difference between bat_mon and Vthr
dummy   VAR Byte      ' For read of on-interrupt port & clear mismatch condition
flush   VAR PORTA.3   ' Set RA3 as input for sensing flush switch closure Int
i       VAR Byte      ' Index used in Gallon counter loop
led1    VAR PORTC.0   ' Set RC0 as LED indicator of valve open..water flowing
led2    VAR PORTC.1   ' Set RC1 as LED indicator of low battery
bat_mon VAR PortA.0   ' Set RA0 as battery low power monitor
meter   VAR PORTA.2   ' Set RA2 as input for Hall Sensor meter pulse Interrupt
open_valve    VAR PORTC.2   ' Set RC2 as valve solenoid open command
close_valve   VAR PORTC.3   ' Set RC3 as valve solenoid close command

' -----[ Declare Constants ]----------------------------------------
'
 k             CON 10   ' Calibration factor for flow meter...# pulses per gal
 Vthr          CON 3    ' Assumes Low Battery Monitor threshold = 3 volts
 
' -----[ Initialization ]-------------------------------------------  
Init: 
' Setup Timer0 as an 8-bit counter with the clock input on RA2.
' 1:1 TMR0 prescaler
' TMR0 counts on high-to-low transitions
  OPTION_REG = %00111000   ' PORTA/B pullups enabled, Interrupt on falling
                           ' edge of RA2/INT, TMR0 clock source is RA2,
                           ' increment on high-to-low transitions, prescaler to 
                           ' TMR0, TMR0 Rate 1:2
  TMR0 = 256 - k           ' preload TMR0 to overflow after k counts
  
' Initialization of inputs/outputs
  open_Valve = 0    ' Initialize RC2 (open_valve) at Low value
  close_valve = 0   ' Intialize RC3 (close_valve) at Low value
  TRISA.2 = 1       ' Set RA2 as input port for clock to TMR0
  TRISA.3 = 1       ' Set RA3 as input port for sensing Flush switch closure
  meter = 1         ' Initialize RA2 (meter) at High for METER pulse inputs
                    ' RA2 = TMR0 clock input for simulated meter pulse inputs
  flush = 1         ' Initialize RA3 (flush) at High value for flush interrupt
  
' Interrupts Setting Alias'
TMR0_Enable VAR INTCON.5     ' Alias for On_Off switch of TMR0 counter
FLUSH_INT_FLAG VAR INTCON.0  ' Alias RA3(FLUSH) On-change-interrupt flag bit
TMR0_INT_FLAG VAR INTCON.2   ' Alias Timer0 overflow flag bit

' Set INT Handler
ON INTERRUPT GOTO Int_handler   

'-----[ Main Code Starts Here ]------------------------------------------------
MAIN:
  ' Perform following steps to save power during Sleep mode
    OPTION_REG.7 = 1    ' Disable PortA/PortB pull-ups 
    OSCCON = %0100011   ' Switch to 1 MHz internal oscillator
    VRCON = %00100000   ' Set Voltage Reference for minimum power consumption
                        ' Disable CVref
    ANSEL= %11110011    ' Set PortA to Analog I/O to save power during Sleep but
                        ' leave Bits 2 & 3 as digital for RA2 pulse count
                        ' TMR0 overflow interrupt & RA3 On-Change intterupt.
    ANSELH= %11111111   ' Analog module enabled to save power during Sleep
    CM1CON0.7 = 0       ' Turn off comparators during Sleep
    CM2CON0.7 = 0
    PCON.4 = 0          ' Turn off BOR during Sleep
    WDTCON = %00010110  ' Turn WDT off to SLEEP indefinitely
    TRISA = %00001101   ' Set RA0, RA2 & RA3 as inputs
    TRISB = %11111111   ' Set all PORTB pins to inputs during Sleep
    TRISC = %11111111   ' Set all PORTC pins to input during Sleep
    PortA = %11111111   ' Write Port A all High to clear mismatch and save
                        ' power during SLEEP  
    PortB = %11111111   ' Set all Port B and C pins High to save power
    PortC = %11111111   ' in Sleep mode
    ' Interrupt Settings
    INTCON = %10001000  ' Enable interrupts: global & RABIE, but TMR0 disabled
    IOCA = %00001000    ' before SLEEP.  Enable RA3 as on-change-INT
    @ sleep                  
    ' Microcontroller is in Sleep State waiting for external FLUSH Interrupt
        ' Valve should be closed at this point and no water flowing
   GOTO Main    ' Loop to Main to wait for next Flush interrupt on RA3 change
 
'------{ Begin Interrupt Handler }---------------------------------------------
  DISABLE       ' Disable interrupts during interrupt handler
Int_handler:                     
    OPTION_REG.7 = 0    ' Enable PortA/PortB Pullups                   
    WDTCON = %0001000   ' Turn WDT on for ops
    'Initialize registers for interrupt ops
  ' A/D & Comparators disabled
    ANSEL=0             ' Set PortA to digital I/O for use with RA2 and RA3
    ANSELH=0            ' Analog module disabled
    CM1CON0=0           ' Disable comparators
    CM2CON0=0 
  ' Port Settings
    TRISA = %11111111   ' Set all PORTA pins to inputs...RA0, RA2 & RA3 are used
    TRISB = %00000000   ' Set all PORTB pins to outputs
    TRISC = %11110000   ' Set lower 4 pins of PartB as outputs for LEDs
    PORTA = %00000000   ' PortA pins all set to Low
    PORTC = %00000000   ' LEDs off, PULSOUT RC3 provides a high-going pulse
    TMR0_Enable = 1     ' Enable the TMR0 pulse counter for overflow interrupt 

  IF FLUSH_INT_FLAG = 1 Then  ' Interrupt was from RA3 on change
    REPEAT
        ' Wait until the external Flush interrupt is at high level...limits
        ' interrupt to switch closure only and not also for switch opening 
    Until flush = 1 
    PULSOUT open_valve,2000*2   ' Generate 20 msec pulse to RC3 to open valve
    'HIGH led1              ' Light indicator that valve is open & water flowing  
    Write  7, flush        ' Write FLUSH value..remove comment for test only  
    ' Put code here to start a timer to run for 50 secs as a fail safe 
    ' to prevent overflow of toilet tank in case of sensor failure.
        'PULSOUT close_valve,2000 ' Generate 20 msec
                                  ' pulse to RC4 to close valve      
  Endif
  ' Valve is open and water is flowing
  REPEAT
        ' Wait for flow to reach 1.6 gallons
        ' Flash flow light while water flowinguntil pulse counter overflows
        High led1
        Pause 125/10
        Low led1
        Pause 500/10
        If diff > 2 Then   ' Battery is low..flash the low battery monitor light
            HIGH led2      ' while water is flowing
            PAUSE 125/10        
            Low led2
            Pause 500/10
        ENDIF                                            
        'Write 5, bat_mon  ' Remove comment for test only 
  Until TMR0_INT_FLAG = 1  ' Until flow meter pulse counter overflows
  PULSOUT close_valve,2000*2 ' Generate 20 msec pulse to RC4 to close valve  
  WRITE 11, TMR0_INT_FLAG ' Write TMR0 value..remove comment for test only
  dummy = flush            ' Clear mismatch condition                   
  FLUSH_INT_FLAG = 0       ' Clear interrupt flag & enable RA3 on interrupt
  TMR0_INT_FLAG = 0        ' Clear overflow flag
  TMR0 = 256 - k           ' Reload TMR0 to overflow after k counts
  RESUME                   ' Resume Main Program                 
  ENABLE   
  '-------{ End of Interrupt Handler }-----------------------------------------
      
    ' If the user program ends by getting to the last statement of the program
    ' at an END instruction, the MCU will SLEEP and await a wakeup.
END