Donkey's tails tend to lose leaves like that, but it can be a sign of overwatering. It would help if you posted a picture of it.

Put it back outside. I've never heard of too much sun or heat for Sedum morganianum. Its adapted to exactly what you're protecting it from.

Most succulents drop leaves from having their roots suffocated either by too much water, or soil that's too dense. Either way, get it outside and let it dry out.

These plants are notorious for loosing leaves with slightest touch. Potting it in hanging basket and keeping out of the way helps too :) All fallen leaves should be tossed back on the surface of potting mix, and most will grow into new plants (unless you don't want any more!)

Thanks for the responses! I've only been lightly watering it (misting the leaves and maybe 1/3 cup of water) once a week, would that be too much for this guy? The water seems to drain quickly as in by time I finishing pouring that little bit of water it's already coming out of the bottom of the pot.

I put it outside Wednesday and haven't touched it since but today it looks worse than ever! The porch gets plenty of sunlight and I have it positioned to avoid any afternoon showers. I've thought about repotting it, could that help? It was a full, healthy plant when I bought it but since then it's just been declining. :(

The water comes out of the pot because the soil is bonr-dry, and therefore hydrophobic. That's what happens to milled peat moss/sphagnum moss when it dries out. The pot needs to be soaked. Use a bucket or the tub, and soak the pot for about 20 minutes, or until the pot sinks and stops bubbling. Right now it will float. After that, the soil will absorb water properly again.

Don't mist the leaves. It's pointless. Succulents can't absorb moisture from the air, and they don't really lose moisture to the air (not a significant amount). They're adapted to deserts where there is little or no moisture in the air.

Once the soil is rehydrated, water it only when the soil is ALMOST dried out, but before it has become hydrophobic, or you can put it into something like coir that doesn't have the hydrophobic tendencies that peat moss has. You can also just reply it, but again, you'll have to prevent the soil from ever getting bonr-dry, while being careful never to let it remain wet for any length of time.

The leaf drop is from being too dry. That mystery is solved at least. ;-)