I can't speak to the specifics of your project, but 128-bit symmetric crypto on 8-bit microcontrollers is perfectly possible, at a low power budget and with relatively small code and RAM usage.
When we were looking at the task of creating autonomous battery-powered reasonably-sized device with 6 years lifespan - we took into consideration every single point where we could conserve power. Now we have what we have, not what you think we could have. Feel free to try and break our encryption with couple kilobytes of ciphertext on hands - you will have a prize of reading your neighbour's water consumption data on a daily basis)
