They turn grey when all associated time is tagged. When it is only partially tagged it keeps the color, that is why Active for example is still green, because not all of associated time was tagged.

Can't comment on the lower third dbquery since it starts at 5:01, which is not part of the image, but I imagine that time is not tagged.

I agree, it would be much better if this was broken up, so that it would be accurately grayed out.
We were aware of this when we were working on this feature. The problem was that we would have to break things up on the fly, then a lot of the stuff becomes harder. For example now you can delete one entry, lets say Active from 10am to 11am. If we break it up on the fly, we have to keep the same functionality, so lets say its broken up in 10:30 to 11:00. If we delete this we have to modify the database, not only delete it, because now 10:00 to 10:30 stays while 10:30 to 11:00 is deleted.
All this stuff just becomes a lot harder. It can all be done, but in the end the question always comes down to, do we want to waste a month on this or do we rather work on something else. I guess its obvious how we decided in this case :)

For example, one thing I'd really like to see is a unified Documents and Apps timeline. The only reason they are separate is to keep a summary for each. So you have a summary of all the apps, as well as a summary for all sites. If we unified it, there would have to be two summaries, which means a different way of working for this timeline and again a lot of changes throughout the app.

There is a bunch of stuff like this in MT, where it would be great to fix it, but for now it just isn't important enough. But I'm sure we will fix all of this when the time comes.