How do you figure the power dissipation is 600mW?
It would be if all the of the 120mA would go out the Vss pin, thus 5VÄ*120mA. But now, most of the current is going out the I/O-pins with FAR less voltage drop than 5V.

Let's be conservative and say that the voltage drop across the high side switch is 1V, in other words the pin sits at 4V when high.
Then the power dissipation of the PIC core is 5V*10mA=50mW and of I/O is 1V*110mA =110mW for a total of 160mW which is a whole lot less than the 800mW max, In reality I'd think (but do measure) the voltage drop across the high side switch is far less than 1V.

/Henrik.