Did medieval people have such a confused conception of time and history?

Not particularly. One of the more popular formats for writing history in the Middle Ages was the 'universal history', where an author would attempt to record everything since creation starting with Genesis and then ending at the author's own time. Most of these universal histories are rather formulaic in how they describe pre-medieval events because they're all working from the same few sources, usually Orosius' *Seven Books Against the Pagans* and whatever scraps of history could be found in Roman authors like Cicero, but the basic sequence of events is correct. They will discuss the Trojan War (where they assumed Homer's tales are mostly historical), then move on to the Persian Empire, skip over most of classical Greece because they didn't have access to the Greek sources, then the rise of Alexander the Great, then the Romans. Once they get to the collapse of the Western Roman Empire this is usually where such histories will start inventing things, because there's a massive gap in the sources for late antiquity and the early Middle Ages, especially for Britain. From the 13th century onward this is usually where universal histories put Arthur, because they think Geoffrey of Monmouth's book of English history is accurate rather than the load of bollocks it actually is. From Arthur, the universal histories get more and more detailed and more accurate as the topic moves onto more recent things like Charlemagne.

In other words, medieval historians were well aware that there was a substantial temporal gap between men like Alexander the Great and Charlemagne. The universal histories don't usually put dates to the events they describe (though the Victorian historians that first edited the Latin editions of them often did, which is confusing), but they certainly get the chronology broadly correct. They even do this for times where they have very little source material to work with, such as classical Greece, where they piece it together from scraps of Roman material.

Chrétien de Troyes knew all of this. He was a remarkably learned man and probably had access to universal histories. He certainly knew people who did, as he was well connected with the government of King Henry II of England and with the cathedral school at Chartres. It's not that he didn’t understand the basic chronology of history. If anything, he’s sort of riffing on it to make a point. As Chrétien explains in the opening of the story:

“Our books have informed us that the pre-eminence in chivalry and learning once belonged to Greece. Then chivalry passed to Rome together with the highest learning which now has come to France. God grant that it may be cherished here, that the honour which has taken refuge with us may never depart from France … of Greeks and Romans no more is heard; their flame is passed and their glowing ash is dead.”

Medieval thinkers generally believed that values of honour and virtue were universal. They also generally believed that they were the heirs of classical virtue ethics as they understood it from the ancient Greek philosophers. Plato, Aristotle, and Stoicism (via the Roman philosopher Seneca) were increasingly important in Chrétien’s time. Bernard of Chartres put it best when he suggested that medieval thinkers were ‘standing on the shoulders of giants’, those giants being the Greeks and Romans. Although the story plays loose with history, it’s not about history. It’s about virtue, and that was seen as universal. It therefore makes sense for these characters to cross paths given the theme, and medieval audiences could probably suspend their disbelief to engage with that.

Chrétien is also playing on another popular theory of history - ‘translation of empire’. Many medieval historians and philosophers theorised that history was about transfers of power between great empires. Not everyone agreed on the succession, but generally it went from Persia to Macedon to Rome (sometimes Carthage is wedged in here somewhere) to the western European kingdoms, usually whatever kingdom the author liked most. Germans tended to say that the current great power was the Holy Roman Empire, Chrétien says it is France. But they all agreed it was somewhere in Christendom. This is what the story is really about; the decline of virtue in the old world (namely that of Alexander) and its renewal in a new world order (Catholic Europe) that came long after it. Chrétien wants to show the connections between the world of classical Greece and the early medieval world that his readers would be more familiar with to reinforce the idea of the medieval world as heirs to the virtue of the classical world, and to do that he decides to put these characters from different times next to each other in the same story.

What medieval writers did often misunderstand was that warfare in the ancient world was very different to their own. They had no sources to tell them what a phalanx was, for example. They often assumed that ancient warfare was basically the same as their own, because they had no reason to think otherwise. As far as they knew, everyone fought with swords, lances, and bows, so what could be that different with the swords, lances, and bows of 480 BC? Obviously a lot, but they had no way of learning that unless they happened to know Greek (which was very rare) and also happened to come into the possession of a Herodotus manuscript, which was even rarer. This probably helped when putting characters from different times into the same story, because they did not understand that Alexander the Great fought very differently from Charlemagne. Even their sources for the Roman army fell into this problem because they relied heavily on the late Roman author Vegetius, whose description of the legion in its prime makes it look a lot like a medieval army, with a heavy reliance on cavalry that it didn't actually have.

So no, medieval people did not massively misunderstand history. Cliges is an example of a rather clever author using the historical framework people would have been familiar with - particularly translation of empire - to make a point about the universality of virtue and medieval Europe’s place as the moral and philosophical heirs of the ancient world. Where they did fall short is in their portrayal of ancient characters, which they portrayed as essentially like themselves because they didn't really know any better.