1)isn't it time you switch?
2)isn't it time you switched?
which is grammatically correct?
I think it is the first one.
One of these is an elliptical sentence. It looks like both are. The complete sentences would be as follows.
1)isn't it time for you to switch?
2)isn't it time that you switched?
However we say "isn't it time for him to switch", but we don't say, "isn't it time him switch". For that reason, I don't think the first one is correct. I agree that the tense in the dependent clause has an interpersonal function. We say
"Now is the time that we usually eat" or
"It's time that we ate."
Interestingly, this is a different pattern than the one containing the expletive "it"
"It's fortunate that we ate."
We can say,
"That we ate is fortunate"
but we can't say,
"That we ate is time" or "Now is the time that we ate"
It's similar to the use of past tense for emphasis in,
"I would rather we ate."