A common "upgrade" for these lights is to use a capacitor and a bridge rectifier to eliminate that blinking, crammed in to a little box at the start of the strings.
I wouldn't do the upgrade yourself for a couple reasons. First, if you did a bridge rectifier with a RC filter, you're essentially turning 120 V AC into 170 V DC and that at the very least will shorten the LEDs lifespan. Second, depending on how it's wired, I believe that only half of the string may be light up.
I do wish more LEDs had the rectifiers in from the factory though. The 60 Hz flicker pisses me off a lot and the colors are so brilliant when they are full wave. They've also seemed to have figured out "white" LEDs a bit better now so I hope that technology trickles down. Since a "white" LED is really just a blue LED with some yellow phosphor, it is a bit tricky to get them to a nice color. Plus, people just seem to prefer their clear Christmas lights with a bit more yellow in them.
Anyway, to answer the OP. This is normal with these timers but it's not a big issue really. The LEDs are not a resistive load so they aren't really triggering the shutoff completely. A snubber (aka a resistor) of some sorts would make the LEDs turn off. You could do this with a high kohm resistor but something like a C7 bulb would do it as well.
Like this:
http://www.amazon.com/Darice-6402-Co...s=c7+bulb+cord
Don't worry about the life span either. The sockets in the string are going to wear out far sooner than the bulbs. If the bulbs do fail, it's because they got rusted. The pins are still made of tin and those replaceable bulbs actually can defeat the seal pretty easily.