Reel-Break: the key is that you must never have a situation where the neutral is derived to ground at multiple points, as this would allow current to travel through the ground wire. There are two ways to do this:
1) ground the service and the generator neutral one one point (usually the service entrance or the transfer switch)
2) Switch the neutral at the transfer switch
There's some very good information in this thread:
https://www.electrical-contractor.net/ubb/Forum1/HTML/007992.html Edit: you need to check the internal wiring of the generator, too, to make sure the neutral isn't grounded inside the chassis.
[This message has been edited by SteveFehr (edited 02-13-2007).]