Well Scott, That transformer will work.... for a short time at least. How could a thing like this happen?. One other thing, I have certain mis-givings about that run of EMT over the top of that exhaust silencer as well, we all know how hot they get!.
Let's face it, these days if you're not young, you're old - Red Green
Agreed, more info is needed here. Many of those 'silencers' (they're not called mufflers for a reason) are wrapped inside with fire and heat retardent. That means it may not get as hot as you'd think, but that should be in the submittal documents. It also appears that it was here for some time prior to the EMT, so who's problem is that?
I'd be more concerned with the "air over" portion of the cooling. That's something that will get overlooked over the years.
"the 480V generator will power this panel through a little 30 KVA transformer.
While a 30KVA transformer looks a little undersized for the generator. (I am guessing by the 6cyl diesel that it is 60KW or more) If it has a correctly sized OCD it should be fine electrically. No doubt the diesel will wet stackfrom being underloaded, but that is another story. Outside of the EMT over the exhaust, I don't see too much problem. Well, I don't see any fire suppression system either, but that could just be outside of the photo.