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Wow, I sure hope that is not an attached garage. There are so many things wrong with doing this that I don't know where to start. Fire hazard. CO hazard. Theft hazard. and likely more. At a minimum, CO detectors, and fire/smoke detectors are needed. And that's only if it is not attached...

1. Yes, it is the newest NEC code. I do know of a few who have been 'bitten' by it however! 2. FWIW, that box is also (physically) large. Were I to need a whole house switch-over setup I'd absolutely use it.

An automatic changeover (transfer) is not required, and a manual switch can be used. If an automatic changeover is used, the generator must be sized to handle the full load, and I suspect your generator is not that large. This requirement has been described in depth on the Internet, a search...