aganga,
You can work anywhere and be paid. I worked in a country that didn't even have a branch for my company. I just hung out there and worked, until I could come back.
Please note that the new law for H1 extension starts the 365-day count from the very first application (to the State) - no longer 365 days from the time your application gets to the INS.
The situation is really not bad if your company will wait for you. The only irony I found is that the IRS will consider you a "resident" and still tax you while you're away. But, the INS wouldn't consider you "resident" in the same period, so you have to leave! Go figure...
Good luck.