Is there a way to trace the reason 'fseventsd' process hogs CPU?
fseventd is the filesystem event logging process, you can read a lot about it in the ars technica review of Mac OS X Leopard. You can use programs like fseventer to see the same kind of output it sees.

From the article:


  The FSEvents framework relies on a
  single, constantly running daemon
  process called fseventsd that reads
  from /dev/fsevents and writes the
  events to log files on disk (stored in
  a .fseventsd directory at the root of
  the volume the events are for). That's
  it. That's the super-high-tech
  solution: just write the events to a
  log file. Boring, pragmatic, but quite
  effective.


You can check that log though I dont know how useful it will be for you. I would not be that surprised to see Time Machine, which deals with many files, and sometimes many many tiny files, to possibly cause some issues with fsevents.