Dave,
Answers to your two questions, based on circuit principles. There may be NECode rules that take precedence.
1. As I stated above, because the generator winding center-tap (neutral) is solidly connected to the house service grounded (neutral) conductor in your transfer switch(see Diagram 1 above), it is already grounded, and should not be regrounded.
2. Connecting the frame of the generator to a ground rod will not protect you from shock caused by a fault in a power tool!!
Don't plug outdoor tools and appliances directly into the generator receptacles, after it has been modified by "unbonding" the neutral.
The bottom line is - The grounding/bonding requirements for the safe use of a portable generator are different from those for a generator that is wired to a building wiring system.
I recommend that the receptacles in the generator be disabled if it is wired to your building system using a transfer switch. Plug your outdoor tools into the house receptacles which should be GFCI protected.
If you must use the generator receptacles, the system should be wired as shown in Diagram 2 (above) using a three pole transfer switch, and leaving the neutral-to-frame bonding jumper in place.
Ed
[This message has been edited by electric-ed (edited 11-22-2002).]
