Hello. Would I size to the breaker 2P/40 or the disconnect 2P/60 and why? Also, it would be 2 hots and a ground( diff size ground). Thanks again.
The conductors are sized per the load. There are other rules involved in the OCPD that may or may not apply. But if you size the conductors to the OCPD, you can't go wrong.
So in your diagram, the OCPD is the 40A 2P feeder breaker in the panel. The local disconnect appears to be Non-Fused and is rated 60A only because they come in 30A or 60A, but 30A would be too small. There is no such thing as a 40A (knife blade type) disconnect switch, which is what that symbol typically depicts.