A possible answer - they discuss in Earth hours because Babylon 5 runs on Earth hours, being a human station crewed by humans. As a space station they get to set their own clock, and would naturally then set it according to what the crew are used to. It doesn't even have to be tied to where they are in relation to the sun of the planet they're orbiting since most of the station doesn't have windows anyway.
So when G'Kar and Na'Toth talk Earth hours, they're specifically disambiguating from Narn Hours to avoid confusion in the conversation. Since all the local clocks will run on Earth hours, it'd be easier to track rather than be constantly converting to a time system that isn't relevant to your current location.