I've had the exact same issue as well going from Iowa to Indiana this past weekend. If anyone knows a fix that would be much appreciated.

 

I apologize in advance if this is elementary or you have tried it:

1. Tap the widget
2. Menu -> Settings
3. Make sure "Update Automatically" is checked.
4. Look at your Update Frequency.

Again, you probably already did that, but just in case!

 

Ive had this problem with Windows Mobile phones too. I always had to manually set them after arriving. I did have an issue with Beautiful Widgets not displaying the correct time and even the lock screen widget being different from the desktop widget and they both were wrong from the actual time. I deleated them both and re-installed and they have both been correct since. Just a wierd problem. Did you have the GPS on for location? Maybe that had something to do with it.

 

This is completely not helpful, but my clock widget eventually auto-corrected after a day.
*EDIT* Handcent update today fixed my other issue with timestamps displaying incorrectly