I agree that talking to your dr about how hard it would be to stop the .5 mg of xanax. It's a small amount, I guess, but for a very long time, so he may have advice about that. If your dr recommends klonopin, hopefully it would be for a very limited time so that it wasn't so hard to stop.
I have anxiety and chronic insomnia and I understand how frustrating it is. I do so much middle-of-the-night reading, it's ridiculous.