First let me say, this is an awesome thread. I have been meaning to read it from the beginning, but I am a slow reader.

LEDave, WDT in the snippet you just posted works like this:
Assuming PBP knows you are using the WDT, clear WD is sprinkled around the program for you to keep from resetting the chip. But to get to these, the program must run.

@sleep basically stops the program and the chip just, well sleeps. Because of this, the WDT never gets cleared. The WD can wake up the PIC, so when WDT overflows, the PIC wakes up and resumes where it left off. So this is how the WDT is associated with the counter.

Hope this helps