And, yes, I thought the XBee is for the Zigbee designs. But will it do WIFI so I can talk to it via my laptop or router. And, if so, can I run the IDE to communicate via WIFI - that's the bigger question?
There are number of XBee modules. Only one of them is a WiFi device. I don't think that you can program the Arduino via the XBee Wifi device.
There is only one WiFi module from Digi Inc., the company that is also making the ZigBee modules but there are many Wifi modules in XBee factor. One is the WiFi Bee from Seeed Studio (http://www.seeedstudio.com/wiki/Wifi_Bee
), another one is the RN-XV from Roving Networks (http://www.rovingnetworks.com/products/RN_XV
And, if so, can I run the IDE to communicate via WIFI - that's the bigger question?
If that means that you wanna upload compiled sketches through it, so I guess you might get that done with a RN-XV and a few wrapper scripts, at least on unixoid operating systems, I guess it's much harder to achieve the same with the Windows variants. If you wanna have the same convenience as with the USB cable (auto-reset when connecting) you'll have to add additional hardware at least but it might be possible although I never tried.