When it's in standby mode, the BIOS is what's doing the idle loop, I'm pretty sure.
But the act of going into standby and coming out of standby is a complicated dance between Windows, hardware drivers, and the BIOS. Usually, problems in this area can be traced down to:
- System needs BIOS update.
- Windows needs latest update patches.
- Some specific application or driver (especially thins like wireless card drivers or video drivers) is screwing things up during the standby/wakeup process. Sometimes hardware driver updates will fix this, sometimes not.
Sometimes you get a system that *just has bugs* with standby and none of the above fixes it.
I will say that with each successive release and service pack of the Windows OS, standby mode has worked better and better. They keep working on that feature and keep tweaking it and fixing bugs and specific-system incompatibilities. If the user can run Vista, it's the best OS I've seen so far in this regard.