On my 3.2 Ghz desktop, Windows 7 RC, when the Bubbles Screen Saver kicks in, the desktop clocks/displays quit updating, they do update when the screen saver is de-activated.
Is this a normal/expected situation?
That's normal for the bubble screen saver. From what I can tell it basically takes a snapshot of your desktop and runs the screen saver - thus, the clock does not update.