Hi Thorin,
Some advises:
1- If you tell us which part you are using it is easier to help! 

2- Some HCS08 do not have STOP1 mode;
3- While in debug mode the MCU can't enter STOP1 nor STOP2 modes;
4- The LVD circuit must be disabled in order to enter STOP1 and STOP2 modes (your code correctly disabled the LVD circuitry).
My book 
HCS08 Unleashed has some examples on Low power modes. The examples can be downloaded at 
www.sctec.com.br/hcs08 .
Best regards,
Message Edited by fabio on 
2008-08-08 10:41 AM