Don you said:

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The good megger reading doesn't necessarily mean that the insulation has not been damaged. It just means that under the current conditions that there are no phase to phase or phase to ground shorts. The insulation could be cut through to the copper and still get this reading if there are no conductive substances

.. and I got to ask, then why megger at all? And why trust our Tools, if we can not rely on these tools,meters, meggers , clamp-ons, then troubleshooting becomes impossible.
I admit using a VOM or digital meter to find a ground fault is not a good idea but I have always had good results with a megger in such situations.
And you are right, up to a point, because if there is a fault in the wireing in conduit say some 50 to 75 feet from the controller and the controller is determined to be ok the problem is located somewhere between the motor and the controller, aside from the obvious damaged conduit, or a smoking motor, you must rely on these tools.

Just my two cents..

WOC