Over the years there has been tremendous improvements to the NEC. What we are discussing is really minor when compared to other issues that have been greatly improved upon. I would like to think that there are more import and topics yet to be addressed than this one. It's a matter on understanding what is practical as compared to what is actually needed in order to follow the rules of the NEC. When you think about it if the conductors are sized to carry the load, does the generator even have the capability to overload the conductors at all. Essentially the generator will be over sized wasting capacity if one were to opt for a 400a breaker.
This has been a good discussion.
As far as the generator being oversized if it was set to only supply a 400 amp load, I would think this is not an issue being were only talking about 16.67 amps of being over sized, I could see your point if we were talking about a 100kw feeding a 200 amp load but generators are over sized all the time in backup installations as many houses don't come near requiring the load the service is sized at and many generators are over sized even to the demand load, even if they are sized more closely there will be times like at night the loads might be very little but the generator will still be running, maybe an 80k would have been fine at 333.33 amps if the demand load of the building was less then this but we don't know if a demand load calculation was ever done, if this is commercial then it is possibly it could have been over the the 80kw rating which would have required the 100kw, so yes its a waste that many live with to make sure they have enough power to meet their loads.
As far as the generator having enough current to overload the 600's well sure it does, how be it for how long is another question, most all generators will produce enough extra kw's to handle surges cause by motors starting up, but this is only for the short term and is not something that should be done for the long term, as unlike a transformer they do not design the alternators to handle this over current for very long to keep things smaller and cheaper, but can it damage the conductors very possibly if nothing shuts the generator down such as electronic overloads, most smaller generators don't have this and can easily be damaged if the over current last to long, but they still can damage the conductors depending upon how long the over current last and the alternator lets go, as far as short circuit current goes I have seen a 15kw trip the 100 amp breaker on the generator with no problem without causing damage to the alternator, not something I would keep doing but yes they can have enough available current for a short time.
Also unlike many portable generators which more closely size the prime mover closer to the rating of the the generator, most backup generator manufactures will use the same size prime mover for a series of generators, Generac uses a 1 liter twin air cooled engine all the way up to there 20 kw units, so a 15kw is not going to stall the engine when overloaded, so it could produce enough current to overload the conductors.
I just went through some of the online specs and see they have changed the size of the breakers they are putting on their generators, as they are more closely sized to the output or even undersized which I find very strange, these spec say the 14kw has a 60 amp breaker which is just above the current a 14kw will produce, but the 17kw unit has a 65 amp breaker which is below the 70.8 amp it would produce , before the breakers were much larger, I looked at a few pdf's I have on the old specs and see they have changed a few things, they still use the 1 liter but the fuel usage is kind of strange, the 17kw uses more NG then the 20kw does at full load, but on propane it switch's the other way around, so either a misprint or something is strange? maybe they did away with the surge rating after to many alternators burned up, who knows I see they no longer have the surge rating listed in the specs?
Heres a link to the specs:
Specs for the 14kw,17kw,20kw
Wonder what happen with Generac?
But anyway, I still believe that a generator can produce enough over current to damage conductors if not protected for long term overloads and with the new specs and smaller breakers I would think it would be harder, but in the OP case with the 500 amp breaker on the generator it would be much easier, as a matter of fact I looked up the latest specs on a
Generac 100kw which now shows a 450 amp breaker for the 120/240 single phase model, looking at the lock rotor rating which is the available fault current @ 35% voltage dip, show the available output is 200kva which is 833.33 amps, more then enough to damage the 600's?