Reading AC signal from a XBee analog input pin
The analog pins on an Xbee act virtually identically to the analog pins on an Arduino -- they are inputs to a successive approximation analog-to-digital converter. If the ADC performance of the Xbee is sufficient for your application, then you don't need an additional microcontroller (check the Xbee datasheet for this). And yes, you should use a half-wave rectifier or some other means of protecting your input pins, since the current sensor you mention can output negative voltage.