The way to change how iCal display its time, go to System Preferences, and select Language & Text. One of the tabs showing in this preference pane is Formats. Press the "Customize..." button, and change the format to whatever you would like it to be by dragging and dropping elements into the different boxes. Delete elements by selecting it and typing the back-space button.
That is it. You will have to restart iCal for the changes to take affect.