Yes, it works, and its great! My Multitester doesn't even show the amount of mA used (uA actually) during Power-Down, its really impressive. During usage is 25mA, not bad, since it lasts a few ms before it powers-down again.
I had to do some changes to the Infrared code to work on my ATmega8 chip, the one I'm using. Tests were done with a 3V battery and no external crystal. (just the chip actually) Question: do I need a capacitor for this? I see the U.Remote I got has a kinda big one inside.
Here's my first DRAFT TEST code, just to keep things in motion. 
Main file
// Power Saving based on code by CrossRoads - http://www.crossroadsfencing.com/BobuinoRev17
#include <avr/sleep.h>Â Â Â // powerdown library
#include <avr/interrupt.h>Â // interrupts library
void pin2Interrupt() { ; } // brings back from sleep.
int sleep_count = 0;Â Â Â // flag/counter to tell us to go sleep
int pin2 = 2;Â Â Â Â Â Â Â // Int0 interrupt pin
uint8_t pressedButton = 0;
uint8_t ligthsOnOff = 0;
void enterSleep()
{
 attachInterrupt(0, pin2Interrupt, LOW);
 delay(50);
 pressedButton = 0;
 set_sleep_mode(SLEEP_MODE_PWR_DOWN);
 sleep_enable();
 ADCSRA &= ~(1 << ADEN); // Disable ADC
 pinMode(10, INPUT);
 digitalWrite(10,HIGH);
 sleep_mode(); // now goes to Sleep and waits for the interrupt
 // The program will continue from here after the interrupt.
 detachInterrupt(0); //disable interrupts while we get ready to read the keypad
 sleep_disable();
}
void setup()
{
 pinMode(13, INPUT); Â
 digitalWrite(13, LOW);
 Â
 pinMode(5, INPUT); Â
 digitalWrite(5, HIGH);
 pinMode(4, INPUT); Â
 digitalWrite(4, HIGH);
Â
 pinMode(pin2, INPUT);        // our sleep interrupt pin
 digitalWrite(pin2, HIGH);
 // define all the unused pins as inputs with internal pullups for lower power state
 pinMode(0, INPUT);
 digitalWrite(0, HIGH);
 pinMode(1, INPUT);
 digitalWrite(1, HIGH);
Â
 enterSleep();
}
void loop()
{
 if (sleep_count>=1)
 {
  sleep_count=0;
  delay(100);
  enterSleep();
 }
Â
 if (!digitalRead(5)) pressedButton = 5;
  else if (!digitalRead(4)) pressedButton = 4;Â
 if (pressedButton == 5)
 {
  digitalWrite(13, HIGH);
   if (ligthsOnOff == 0) sendNEC(16236607, 32); else sendNEC(16203967, 32);
   ligthsOnOff = !ligthsOnOff;
 Â
  delay(250);
 Â
 }
 else if (pressedButton == 4)
 {
  digitalWrite(13, HIGH);  delay(50);   digitalWrite(13, LOW);  delay(50);  digitalWrite(13, HIGH);  delay(50);   digitalWrite(13, LOW);  delay(50);  digitalWrite(13, HIGH);  delay(50);Â
 }
 else // Couldn't detect which button was pressed
 {
  digitalWrite(13, HIGH); delay(1000);  Â
 }
 digitalWrite(13, LOW);
 delay(200);
Â
 sleep_count++;
}
Infrasend code
// Based on the Infrared Lib by Ken Shirriff - http://arcfn.com/2009/08/multi-protocol-infrared-remote-library.html //
// WilliamK @ Beat707.com - Updated to work with the ATmega8 using Timer1 instead of Timer2
#define NEC_HDR_MARK 9000
#define NEC_HDR_SPACE 4500
#define NEC_BIT_MARK 560
#define NEC_ONE_SPACE 1600
#define NEC_ZERO_SPACE 560
#define NEC_RPT_SPACE 2250
#define TOPBIT 0x80000000
void mark(int time)
{
 TCCR1A |= _BV(COM1B1); // Enable pin 10 PWM output
 delayMicroseconds(time);
}
void space(int time)
{
 TCCR1A &= ~(_BV(COM1B1)); // Disable pin 10 PWM output
 delayMicroseconds(time);
}
void enableIROut(int khz)
{
 pinMode(10, OUTPUT);
 digitalWrite(10, LOW);
 TCCR1A = _BV(WGM11) | _BV(WGM10);
 TCCR1B = _BV(WGM13) | _BV(CS10);
 OCR1A = F_CPU / 2 / khz / 1000;
 OCR1B = OCR1A / 3; // 33% duty cycle
}
void sendNEC(unsigned long data, int nbits)
{
 enableIROut(38);
 mark(NEC_HDR_MARK);
 space(NEC_HDR_SPACE);
 for (int i = 0; i < nbits; i++) {
  if (data & TOPBIT) {
   mark(NEC_BIT_MARK);
   space(NEC_ONE_SPACE);
  }
  else {
   mark(NEC_BIT_MARK);
   space(NEC_ZERO_SPACE);
  }
  data <<= 1;
 }
 mark(NEC_BIT_MARK);
 space(0);
}
/*
Timer 1 Details
 OC1A = Pin 9
 OC1B = Pin 10
 TCCR1A
 7   6   5   4   3  2  1  0
 COM1A1 COM1A0 COM1B1 COM1B0 FOC1A FOC1B WGM11 WGM10
 TCCR1B
 7   6   5   4   3  2  1  0
 ICNC1 ICES1 -   WGM13 WGM12 CS12 CS11 CS10
 Timer 1 for Infrared Settings
 phase-correct PWM with OCRA as top = WGM13 WGM11 WGM10
 No Prescalar = CS10
*/
Tomorrow I will read more and see what I can figure from the diodes.
Takes me a while to figure things out... I got a DVD board that I could also take some SMD Diodes from it. 