Generator and Insteon

I am looking at installing a generator interlock in my interior sub panel but had a few questions before I purchase any material. I have looked at the Reliance generator transfer switches, but would rather use a generator interlock to reduce complexity and increase flexibility.

Current setup.
1. Exterior weather proof main with a single 200 amp main.
2. Interior garage sub panel with no main.

Questions.
1. For a generator interlock, I need to have a main and generator breaker in the same panel. My SqD exterior main panel does not have provisions to install a generator interlock (Q22200NRB) that I am aware of, and I certainly don't want the expense of replacing it with one that might.



Thus I need to install a main in the sub panel. Is this allowed per code? Obviously I will have to move loads to install a generator breaker in the 2-4 position.
UPDATE: A main in a sub panel is not required but recommended.

View attachment 7040

2. While running on a generator, will I need to make any provisions to any line conditioning or anything else to allow Insteon signals to continue to work? My sub panel has a floating neutral, but I assume in my main the neutral is grounded. What about the generator neutral? Should it be grounded to the frame of the generator or floating where is presumable is grounded via my main breaker box?

I plan on using the following generator unless someone has a better recommendation.

http://m.costco.com/Champion-7000W-Running--9000W-Peak-DUAL-FUEL-Generator-wElectric-Start.product.100112008.html

Many/most portable generators like that Champion do not produce clean sine wave outputs, which can have damaging effects to "sensitive" electronics, however you want to define that.  But consider things with microprocessors in them, including many appliances these days - even refrigerators and HVAC systems.  Also, some motors are unhappy when the power isn't clean.
 
To get good quality power output, you really need a standby generator, similar to this one.
 
One of the few portable generators that I have found that comes close to a standby generator in terms of power output quality is the Generac XP8000E.  The downside is that it costs almost as much as a true standby generator. 
 
There are also some Honda generators that produce clean sine wave outputs through the use of an inverter.
 
That said, I know many people who use inexpensive portable generators and get away with it. But for the most part, they are using them to power a few lights and their refrigerator, hot water heater and well pump and not much more.

There are power line conditioners that you can add to the output of an inexpensive generator to clean up the power.  But they aren't cheap, and it seems easier to just buy a more expensive generator that produces a good quality output in the first place.

Thanks. I own a townhome and don't have NG service, nor do I have a suitable location for a permanent standby generator.

All I plan to power are lights, kitchen, and maybe my hot water heater. No HVAC, laundry, or other loads over 30 amps.

Not an electrician,
But to answer your subpanel question, yes.
 
If using a 100A sub panel.
You would install a 100 A dual pole breaker in the main panel, that would feed the 100A main breaker in the sub panel.
The interlock would interconnect the 100A main breaker and the 30A two pole back feed breaker in the subpanel so that only one could be on at any time.
Turning off the 100A sub panel main breaker to allow the generator back feed breaker to be turned on isolates the hot legs from the main panel and prevents back feeding the grid.
 
You would not bond the ground and neutral busses in the sub panel, but bring the ground and main neutral over separately from the main panel to the separate neutral and ground buses in the sub panel. 
When bringing branch circuits over from the main panel to the sub panel, you must bring both the hot(s) and neutral and feed them all from the sub panel.
 
I have had OK results with UPB controlled circuits on the same leg of a generator, but no luck crossing over.  Even though my coupler is in the sub panel. 
I believe the signal from my larger 240VAC generator is not clean enough.
I have had no luck passing links through my 120VAC Honda inverter generator, even for circuits on the same phase or branch circuit.
Those switches still operate manually but links do not propagate.  I assume it has to do with the inverter circuitry/diodes.

Thanks.

My outdoor main is just that. All house circuits are in the interior garage sub-panel, thus there is one single 200 amp 4 wire run between which is in conduit and only 3 feet away. The sub panel neutral is separate from ground as per NEC code. I have to install a sub-panel main for the generator interlock device.

I've read conflicting posts on Mike Holts forum on whether the generator should be left a floating neutral given the generator interlock nor the Reliance transfer switches break the ground nor the neutral which are bonded together in the main panel. From what I have been able to digest, for generator stand alone operation the neutral should be bonded to the frame. For a house tie in there is disagreement whether the neutral should be floating or bonded at the generator end.

The ground and neutral should only be bonded at one point (unless a sub panel is in an out building in which case it requires it's own ground rod but is still not bonded to the neutral).
 
Turning the sub panel main breaker off to engage the back feed breaker for the generator does not break the neutral connection back to the main panel where it is bonded to ground.
 
You aren't required (per my understanding) to switch the neutral with the hots.  They remain connected full time.
 
 
(IIRC the code discussion surrounds a "separately derived system")

Generator interlock project mostly complete. The hard part is done. Just have to wire up the generator input.

Had to add a sub main and move some loads to make space for the generator breaker and interlock.

Looking good