I don't know how this post got in front of mine, because it wasn't there when I did my last post, but anyhoo, yes its basically the same switch as in my link, but its a much clearer diagram. I do believe it is the two wires got swapped accidentally. This would cause the switch to work on utility fail, but once transfered, it can't switch back because the other hot is open. I would check those connections first. If it's not there, check for voltage output on J1 to ground. Should be 120 volts at that point if the controller is calling for the transfer back to normal. The CT's are just for load shed purposes, so they should have nothing to do with the transfer.
I believe youre on to something...I will check those two wires as soon as I go back