The time bubble does mean they can to things like never update what NPCs are doing - they haven't been having the same conversation for five years, we're just permanently seeing them at "minute 1" of the time bubble and not progressing.

It does also allow for those optional quests to take place in their designated place in the timeline a little less strangely. It's still odd to play things out of order and see "earlier versions" of characters than you've previously been dealing with, but it make a bit more sense when you've just moved into a different zone of the time bubble. The overall world hasn't moved to a different state where that earlier story can't take place any more.