Thanks for your help Bruce - it has clarified my (mis)understanding - looks like an external Xtal for Timer 1 is the way to go.
BTW in case anyone is mislead by:
Also Timer1/Timer0 will only operate from the internal clock during sleep if you're using a power managed mode that clocks peripherals while the CPU sleeps
into thinking Timer0 could be used to wake the 18F4550 from sleep, I noticed this in the datasheet:
Since Timer0 is shut down in Sleep mode, the TMR0 interrupt cannot awaken the processor from Sleep.
I would have preferred to use timer0 for my clock as I could get that down to 1 Hz with its 1:256 prescaler otherwise . I suppose this is probably also true of Timer1 (without external Xtal) and should have given me the answer Bruce so clearly gave!
Peter