Hi Hank,
I suspect Gordon is maintaining a bunch of software counter/timers in his code, much like in a PLC or something like that. I'm sure he'll elaborate on that.
How I'm doing it...
pic goes to sleep (timer 1 still counts while asleep)
So are you clocking TMR1 externally then or are you using one of the "idle-modes" where the oscillator isn't shut down?

I'm asking because I was sure that the main oscillator is shut down when entering sleep-mode and when TMR1 (or any timer) is set to timer mode it is being clocked by the now shut down oscillator so it can't keep ticking.

If indeed your TMR1 is ticking while the device goes to sleep can you tell us what device that is, I'd like to read up on the datasheet on that one.

/Henrik.