Hi Pankaj,
Firstly, let me apologize for the very late reply and for being out of touch for so long.
I went over your mail and this is what I thought :
1. Firstly, before getting to anything regarding the concept of time, I believe we could introduce some instruments used to measure time(clock,wristwatch etc) via image and image based questions. This will help in making the app appealing to users who could use it without having ANY KNOWLEDGE WHATSOVER regarding time.
2. See the image below for how I intend to teach the users about the 3 different hands of a clock. See how I intend to blur out the parts of the clock which are not in focus to add a good effect. For example, if they are learning about which is the hour hand, I will blur the entire clock except the hour hand and then show some explanation about it. Again the image should give a better idea.

3. Coming to the Interactive clock, I believe it could be initially to give some samples to the users so that they get a hang of how to go about it. Then, in the quiz mode, there can be questions, which require users to tap on the clock to set the time. Then, the locations of the hands can be compared with a preset value to check the answer. Again, I have attached an image to explain better.

4. Here are a few of the technicalities associated with the app :
- For the navigation system in the app, I intend to use a navigation drawer system with fragments assigned to all different portions of the app. This would make the app in line the with most recent app design patterns.Also, the benefit of using fragments will allow the app to be better suited to be scaled across devices and screen sizes.
- For the blurring that I have mentioned above, I intend to use a variation of the "Stack Blur" opensource library. If that does not work out, I will be using different PNGs to depict the different states of the clock.
- The app I propose will obviously use a lot of Animations for the various "cards" spoken by the Cartoon. For this I intend to write my own anim files. I have some prior experience with this so I dont think it will a problem
- Coming to the questions, I intend to store them as strings in the strings.xml resource file and then randomly use them in the app as and when required. This will allow for the app to be kept offline which I believe is a better alternative.
For the USP of my idea, that is the voice recognition based questions, I intend to use android's built in voice-intents. This generates the mostly likely string spoken by the user, which I will then compare with a pre-defined answer to check if the user can proceed or not. 
Please let me know what you think of these and though I will be mentioning all the technical details in my final proposal, please let me know if any further details are required at this point.
I have also, wrapped up with another new app in the past couple of days. Although it is a very simple app for an NGO's fundraiser, it should give you an idea of the kind of approach I intend to take towards developing this one. Check it out :-)
Also, I happened to look through one of the other ideas ie the "Sensor Data" app. I think something performing a similar function aldready exists.
Isnt that app idea something similar to this?
Thanks and Cheers
Shivam