This sounds like a bug that has been around Project Server 2007 for some time. It was fixed after several updates so it shouldn’t be happening anymore if you have all your updates applied. My memory doesn’t serve me well but I think it was back in late 2010 for the final fix.
If your updates are applied and this still happened it could still be a corrupt project. To resolve the issue is to go through a process of (1) getting the correct time from a timesheet report, (2) unchecking the Restrict updates from Project Server checkbox "will need administrator permissions for this", (3) manually correct the project, and (4) check the box again "very important". This should probably be done in off hours as it opens up modifying actual work for all projects.
Hope this helps. Feel free to contact me if you need any additional help. I am also local to MN…:-).
