Westinghouse 28486 used for Christmas lights don't turn off completely when the timer turns off - still outputting approximately1.7 volts. Is this a fire hazard, or will it cause the lights to burn out? Is it "normal" for outdoor timers to put out a low voltage when the timer is plugged in, but off?

No, no fire hazard and will have no effect on lights but I would expect any voltage from a mechanical timer when off . Tell us more, how and why did you do the voltage test.