Reproduced in 6.1.x and Trunk rev. 121581
1. Leave app server using default GMT timzone.
2. Go to Control Panel -> Settings -> Display Settings and change portal default timezone to PST
3. Add Calendar Portlet
4. Add a non time zone sensitive event at 3pm (uncheck Time Zone Sensitive).
5. Event shows up at 10pm. (due to 7 hr difference between PST and GMT)
Time zone sensitive events appear to work fine.