Can the Xbee Series2 support 1-wire sensor interface? If yes, what f/w do I need to use?

Yes, this should be possible (Digi used to sell a 1-wire sensor adapter). The firmare and documentation for the discontinued adapter can be found here:

Thanks for the quick reply!

When you say adapter, do you mean a hardware module in addition to the Xbee Module itself or is it a software adapter?

Also where I get the adapter, if it is discontinued. I am already using the firmware version pointed in the link you provided.