Let's see...
Assuming a CdG counts as "a battle", then the base DC is -10, and sleeping characters have a ten-point penalty to Listen... which means you need a negative Listen check to fail on a roll of 1.
However, if the cleric dumps his armor, and takes ten walking away, the DC to hear him is 10+His Dex mod. The sleeping characters have a ten point penalty, so they basically need to make a Listen check of 20. Walk far enough that the distance penalty makes waking up on the Listen check basically impossible, cast the spell over the party, go back as loudly as you please, and begin slashing throats.
I, personally, don't buy a CdG as a 'battle'. I might give the PC a move silently and modify the listen accordingly, but that's all house.
Wouldn't the Cleric dumping his armor be perhaps an even lower DC? And it takes awhile (1 min.) I could wear some jingling shirt and slowly walk to try to hide the sound, but it becomes harder, IMO, if I take it off.
A '1' is not a fail on a skill check. If the DC is less than one, the PC automatically succeeds (unless it has negatives). So, in this case, a PC rolling a 1 would become a -9 which is still higher than -10.
EDIT: changed higher to lower, oops.
This is how I would adjudicate it (just my opinion):
Logically, when standing watch you really aren't standing, but walking around. So by RAW characters would be waking up all the time and complaining. Instead, just like I am inured to certain sounds in the middle of the night, PCs would be inured to a PC walking around during watch.
So, if the Cleric moves away to cast the spell, I wouldn't even give a Listen check for the move. The spell, yes.
If the Cleric approaches a PC, then I would give the PC one, and only one, Listen check to be aware of the Cleric in proximity.
If they wake, I would give the Cleric a surprise round, followed by normal initiative. Following Listen checks would be based on battle.
If they didn't wake, I would give the Cleric a CdG. If he specifically mentioned he was being stealthy, I would allow him to take 10 on a Move Silently. Otherwise, I would go for a regular MS. In either case, I would give a Listen check for the CdG to be the MS - 10 with a small weapon. If the guy is bashing or hacking, I would make it the standard battle sound.