Scott ,
I am too attempting to make a battery powered Atmega device (I removed it from the Arduino like you so I don't waist the power on the 7805) and I am ruining at 3.3V.
The thing is that I want to track time correctly (I am using the TIME libraries and I want to "wake up" and log events with their correct time but I notice I loose track of time when in sleep mode.
Thanks again
Moris.