I am in a couple of games where the opponent has played the vacation card.

The games are normal 3/7 and his timebank is all red. Not sure when it went red, before he went on vacation or after.

The question is, if that timebank went to zero after he declared vacation, does the timebank go back to 7 after he pulls the vacation card, puts it back on the shelf?

No, it means only that he cannot lose while he is on vacation.
As soon his vacation is over, he is on his own, without any Time Bank.
Vacations almost don\t exist on RHP...