I do my Time Machines the same way as you just described, from a peg wheelie.   Firstly, you might want to try nailing double-foot peg wheelies, if you haven't already.  Being able to roll these comfortably, and for a good length, will mean you don't have to worry about balancing AND switching hands, since the balance side of it will be rather easy.
I like to switch hands while I'm still rolling a 2-footed peg wheelie, then I'll roll 1 handed, 1 footed for a little bit, then reach for the peg.  I had trouble with this for a while, too, then I worked out that I had to pull the grip that I was holding, diagonally back to my hip on my right side.( to about the 4 or 5 o'clock direction ).  If you pull the bars in this direction, the front peg will be more accessible to you to reach. 
I find that the reach for the peg was the hardest part to learn, and get comfortable with.
Check this little clip I made for you, hopefully it shows all I was explaining...   check the
timing of my foot coming off the peg and also, where my hand on the grip is positioned when I grab the peg. (sorry for the poor quality, my camera is pretty crap.  I have a Canon SLR 10.1mpx on the way )

http://au.youtube.com/watch?v=vawQYvMbv-0
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I can't spin them for quids, so if you have any luck spinning them, let me know the secret..!!  lol 

To get a good spin I tuck my leg up real high to my chest after that you sould start to feel kind of unbalanced and theres alot of tension in my arms at this point its tough to keep up but you spin alot more and spin faster lean in alot most of the spin is gained right when you get into the time machine I find the quicker I move my arms and legs the more momentem I have took me ages to learn right but Its super fun and one of the best tricks I know. one last work practice than modify learn it the most basic way and go from there after doing a trick hundrids of times you just kind of get in the grove

While in the "GROVE",,,,,pick us some oranges,mk?

I do my Time Machines the same way as you just described, from a peg wheelie.   Firstly, you might want to try nailing double-foot peg wheelies, if you haven't already.  Being able to roll these comfortably, and for a good length, will mean you don't have to worry about balancing AND switching hands, since the balance side of it will be rather easy.
I like to switch hands while I'm still rolling a 2-footed peg wheelie, then I'll roll 1 handed, 1 footed for a little bit, then reach for the peg.  I had trouble with this for a while, too, then I worked out that I had to pull the grip that I was holding, diagonally back to my hip on my right side.( to about the 4 or 5 o'clock direction ).  If you pull the bars in this direction, the front peg will be more accessible to you to reach. 
I find that the reach for the peg was the hardest part to learn, and get comfortable with.
Check this little clip I made for you, hopefully it shows all I was explaining...   check the
timing of my foot coming off the peg and also, where my hand on the grip is positioned when I grab the peg. (sorry for the poor quality, my camera is pretty crap.  I have a Canon SLR 10.1mpx on the way )

http://au.youtube.com/watch?v=vawQYvMbv-0

I can't spin them for quids, so if you have any luck spinning them, let me know the secret..!!  lol 

Thanks so much for the clip, i think the tip about pulling it up to my hip will help out alot...ima get out there and give this a shot