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This paper addresses the performance limits of the IEEE 802.15.4 standard 2.4 GHz PHY for wireless personal area and sensor networks. As designers start considering the addition of power amplifiers to improve link margin, other methods that do not increase power significantly are of high value. Minimizing power consumption is the key goal of 802.15.4 systems, and improvements in sensitivity can be traded for power savings. The limits from communication theory are compared to the performance of common system topologies, and methods for improving system performance without significant cost are discussed and verified through simulation. Approximately 6.6 dB of sensitivity is shown to be commonly sacrificed, and 5.8 dB is recoverable without large increases in design complexity.