(1) The time transitions in this paragraph include "Within minutes after waking," "then," "An hour or two later," "Later," and "Finally."
(2) and (3) These sentences should be easy to spot. The point is to call attention to the way entire sentences--as well as individual words and phrases--can be used to make smooth transitions in a paragraph.
(4) Various answers are possible. Here's the concluding sentence that appeared in the student's original paragraph: "Only then do I drift off to sleep, counting onion rings in the deep fry and hot dogs on the grill."