Specfically, I would like to know whether a standard Leonardo will work with a watchdog timer?
The leonardo bootloader DOES include a "wdt_disable()" call, and DOES terminate early (running the user sketch) in the case of a WDT-caused reset, so you should be able to use the WDT however you want in a sketch, without any problems (except that the sketch will not be able to notice that it was restarted by the WDT.)