the voltages on the secondary side do read correct as they should...How about the voltages on the secondary side of the step down transformer? Am I correct in assuming your first voltage readings were taken at the 208 panel?
phase 1 to 2 = 205 (this reading is done on the terminal but when the wire is touched, it loses voltage)
phase 2 to 3 = 205
phase 1 to 3 = 205 ( reading doesnt change when wire is touched)
all phases to ground read 118