In software developer circles gold plating refers to putting effort into a feature or product when it's no longer adding value. Wikipedia has a short article on this.

I can't think of a single word, except maybe hours. People talk about the hours they worked on something. "How many hours do you have in this week?"

I saw that one time-tracking site called time spent on a task "active time," and another called it "tasktime" (one word, but coined, I think). In an office setting, it could also be called "billable time" or "billable hours."

You're very close. The colloquial expression is actually "to hang out":

hang out: to spend a lot of time in a place or with someone

Related to your question, I could say:

He spends way too much time hanging out on the Internet.

He hangs out on the internet way too much.

Although this is not in the dictionary definition, these sentences also imply that he is not achieving anything useful during this time, that he is wasting time.

He wastes way too much time hanging out on the Internet

There are numerous other ways to say this: slack off, fritter away (time), screw around, as well as other, less "polite" expressions.