How should the drive know how to protect from overload of one motor while two are connected?
When setting up a drive, you must configure the motor specs for the drive to use as a basis of integral overload protection. Overload trip curves are based on multiples of full load amps. If you enter 150 HP, an overload of one motor might go undetected.
I don't think that's what he meant. He said you would need separate OL protection and that is in the NEC as well.
The OP's issue is whether or not the VFD is OK with being fed by conductors that are not sized per the NEC rule on 125% of the VFD amp rating. Aside from it technically being a code violation, the issue stands as I previously said. The VFD could not care less what size conductors you feed it with, but it will not protect the line side conductors, that is the job of the branch OCPD feeding the drive input conductors.
From what I've determined, the issue on requiring the VFD feeder conductors to be sized for125% of the VFD amps, not the motor HP amps from table 430.152, is because throughout the industry, there are a lot of variations of what the input amps of the VFDs are.
What I've found that I think lead up to it is that in a few cases, there are VFDs designed by off-shore mfrs that are UL listed for HP sizes based on what the mfr tested them for. But because the original VFD design was for 380V motors and they didn't want to have to test too many different sizes, the amp rating of the VFD is higher than is necessary for a 480V system. This was especially true for several Japanese VFD suppliers back in the 90s. What I've seen happen in the field, and what I interpret the NEC was attempting to address in 2002 when this rule was added, is that after the VFD was installed, users read the output amp rating of the VFD and use it on a larger motor. But if the conductors feeding the VFD had been sized per the NEC chart for the originally intended HP, the input conductors ended up being too small. So by ensuring that the conductors feeding the VFD are sized for the VFD rated input amps, it doesn't matter what the end user connects to the load side. This scenario rarely exists any more, most VFD mfrs have optimized their product sizing, but it still makes sense in some cases which is what I believe they intend to try to cover.