Greg,
Sorry, I can't duplicate your issue. The only difference between your timescale settings and mine is that when I use the default label for time it includes the AM or PM. Now, either you left that out for brevity or there is something amiss already with
your installation of Project. Does the problem still occur if you use two or three tiers in the timescale?
I do believe you are seeing something weird so posting a screen shot won't really help. Just to try something, could you send me a sample file that displays the problem. My address is below. I will ask some questions.
John
jensenljatatfastmaildotdotfm
(remove obvious redundancies)