" The transfer switch must be a break-before-make switch which will "break" the electrical connection with commercial power lines before it "makes" the connection between your generator and wiring."

Maybe i am misunderstanding something about your panel. What i understand is that you are turning off the main breaker and then you are turning on a separate breaker to energize your sub panel. Is there a mechanical interlock to prevent someone from pluging in your generator, turning on its breaker to energize the panel and then switching off main breaker? If there is not a mechanical interlock the generator hook up does not meet electrical code. If there is an interlock then i did not understand you correctly.

And my friend is very smart, he just has the common sense of a doorknob. It would not surprize me if he cross wired something to create a dead short.