I think I've heard this construction most often in the past tense: it's time we painted the bedroom, it's time we got your car fixed. But that makes even less sense grammatically, doesn't it.
![Smile [:)]](/emoticons/emotion-1.gif)
And I think "it's time + pronoun" carries a different meaning than "it's time to..." The suggestion for me is "it's
high time."
"It's time we ate lunch," for instance, doesn't just mean, "oh look, it's lunch time" but the suggestion that whatever else we've been doing has been going on quite long enough, or that I'm pretty hungry, or both. I've heard it (and used it) most often in a "scolding" way: "It's time we stopped fooling around and got serious." "It's time you learned how to do your own damned laundry." Etc.