I'm going to examine the maths of transmitting power from a point source (the reader antenna) and assume the passive tag has an antenna that can pick-up, rectify and re-use a fraction of this power. This doesn't consider near-field effects/benefits (these may save the day but my gut feeling suggests they won't).
The reader antenna is pumping out +20dBm - that's a power of 100mW and assuming that is transmitted in all directions and your tag's antenna has an effective aperture\$^1\$ of 50 sq cm, the question is what amount of power can the tag "liberate" from the "ether"?
At 1 foot (30.4cm) distant, the 100mW output is shared over every sq cm of a sphere of radius 30.4cm. The spherical surface area is \$4\pi r^2\$ = 11,613 sq cm.
If the antenna has an effective aperture of 50 sq cm it will receive 100mW x \$\dfrac{50}{11613}\$ = 0.43mW.
It doesn't sound much but, this power can be stored (and accumulated) for about a second or so and build up enough energy in the tag's circuits enabling it to vomit a short response. That's all that is needed for this to work.
Let's make life easier - lets say the reader antenna (transmitting power for the tag) has a gain of 10dB over an isotropic antenna (an isotropic antenna produces a spherical field as in my earlier noodlings).
Now, we can say that the power received is 10 times larger at 4.3mW and this is beginning to sound reasonable but, the transmit field is much more restricted in shape but hopefully this isn't a problem.
As a side note 4.3mW across a 50 ohm load equates to an RMS voltage of nearly half a volt RMS and of course energy harvesting technology could easily reap enough energy to make a short but useful tag transmission.
What about getting it to work at 10 foot (304cm)? The effective power is now 1W because we are using an antenna with 10dBi gain. The area of the sphere is now 1.16 million sq cm and the fractional power hitting the tag antenna (50 sq cm effective aperture) is a measly 43 micro watts.
Will this work? Could it work? If the 43 \$\mu watts\$ were received across a 50 ohm resistor the voltage would be about 46mV RMS - I don't think any energy harvesting circuit will liberate anything from this.
Conclusion -
A passive tag won't work at ten foot - it would need to be powered by a small button-cell and it's MCU would need to wake up every 1 or 2 seconds to see if there was something potentially being received.
\$^1\$ The effective area of a tag's antenna is just an estimate on my part based on a little experience and the frequency the system it is operating on. Theoretically an isotropic antenna operating at 900MHz will have an aperture of \$\dfrac{\lambda^2}{4\pi}\$ which is \$\dfrac{0.1111^2}{4\pi}\$ which equals 8.84 x \$10^{-3}\$ sq metres or 88.4 sq cm. I've assumed the actual antenna's aperture is 50cm. This is somewhat less than an isotropic antenna despite the liklihood that the tag antenna will likely have gain/directionality BUT it will also have a poor efficiency because of it's tiny size and construction. A "real" quarter wave dipole antenna will be 8cm long which obviously is unattainable in a small tag.
I can only relate my experiences: -
If you want to detect a normally-not-powered passive type tag at extreme distances you have to power to that tag from a significantly bigger magnetic field. Making your magnetic field stronger is the only way I can know (and can recommend). Making your tag more efficient in recovering a fraction of this power is also part of the deal. Making the energy needed by the tag smaller is also part of the deal.
Once the "passive" tag is receiving sufficient energy from that magnetic field, it can transmit an RF signal to announce its presence - because it is only very weakly powered it may not be able to transmit more than a few hundred microwatts. This transmission should not have to do-battle with the prevailing magnetic field that powers it - it should be on a carrier frequency that is unconnected with the power magnetic field for this to work most effectively. This will require that the stationary object that generates the power magnetic field is capable of receiving this RF signal.
So now you have two transmissions - the transmission that powers the tag and the transmission from the tag containing ID data - neither are at the same frequency if you want maximum distance.
At about 4 inches (maybe 5 inches if I pushed it), a system I developed could detect the presence of a normally unpowered device. However, I needed to transmit about 1 watt across the gap because the device was doing other things that needed the power - it was rotating on a shaft and wires wouldn't work. The FM transmitter it used was at 80MHz and transmitted at about 1mW. The receiver could detect this at about 1m but it wasn't particularly designed to detect it more than 4 inches. The magnetic field it generated was quite large and the coil it used was wound from Litz wire - I reckon it was about 3 uH and had about 400 volts peak to peak across it at 600kHz (work out the current for yourself!!). Operating the magnetic field at 13MHz could be better but it starts to become a trade-off because, in your situation you want the "detection area" to be large - this means a large diameter coil and you want maximum current through it to produce the bigger and more far-reaching field you are fighting against the inductance of the coil. You need current in that coil to produce a magnetic field and the more the better.
To get that current, I used 250 strand Litz wire and parallel tuning to make the circulating current in the coil much much bigger than the drive current from the generator. This makes it easier to design the generator of course.
In short, if you want to power the tag at distance, think big coil and think litz wire and think parallel tuning for maximum efficency. The power receive coil was also very low loss and highly tuned to get as much voltage as possible when set at the maximum distance. This is what you should focus on in my opinion.
Best Answer
It's possible, but most (if not all) commercially available tags just transmit their code upon reception of the carrier. The antenna is their only I/O.
What you need is a low-power microcontroller which is fed from the energy it receives from the reader's carrier. As a microcontroller it can do anything you like, including sending a code to the reader, and switching any external devices like LEDs. Of course these devices will need their own power source, since the power extracted from the carrier will be hardly enough to power the microcontroller. A good low-power microcontroller is TI's MSP430, "ultra low-power" in TI's marketing speak.
You'll need to have good antenna coupling to get a high enough voltage not only to operate the microcontroller, but especially to control the external logic. You may have to use level shifters which accept very low input voltages. For instance the Fairchild FXLP34 can work with input voltages down to 1V.
This gal made an RDIF tag with an AVR microcontroller and some clever tricks.