Index: app/models/time_entry.rb
===================================================================
--- app/models/time_entry.rb    (revision 13434)
+++ app/models/time_entry.rb    (working copy)
@@ -42,6 +42,7 @@
   validates_length_of :comments, :maximum => 255, :allow_nil => true
   validates :spent_on, :date => true
   before_validation :set_project_if_nil
+  before_validation :set_project_activity_if_needed
   validate :validate_time_entry

   scope :visible, lambda {|*args|
@@ -93,6 +94,17 @@
     self.project = issue.project if issue && project.nil?
   end

+  # If the activity_id corresponds to the system activity, and an equivalent project activity exists, then change the activity_id
+  # to be that of the project instead (needed because only the system activity_id is exposed by the REST API).
+  def set_project_activity_if_needed
+    if self.project
+      project_activity = TimeEntryActivity.find {|a| a['project_id'] == self.project.id && a['parent_id'] == self.activity_id }
+      if project_activity
+        self.activity_id = project_activity.id
+      end
+    end
+  end
+
   def validate_time_entry
     errors.add :hours, :invalid if hours && (hours < 0 || hours >= 1000)
     errors.add :project_id, :invalid if project.nil?