How can the fuse current on the primary side be basically the same as the 480 V current? I haven't looked at SKM reports for a bit, but for a fault on the 480 V side, the primary current through the fuse should be reduced by the transformer turns ratio. It would be unusual for a primary fuse to clear that quickly for a low side fault. Also, the arcing current through the protective device is significant less than the total bus arcing current. Is there a second source of fault current, or is this just a lot of motor contribution? I'd look at the fault currents on the one-line diagram. The total arc current is 16.5 kA but the current through breaker is only about half of that. Are you sure the tie is open in your model?
I would also take a close look at the time current curve for the low voltage breaker and make sure the settings are accurate. Even without Instantaneous, there will be a short-time trip that should clear before 2 seconds. I'd try reducing the short-time pickup to something below the calculated arcing current.