Sounds like an out of phase condition to me...
If your transfer switch internally shorted, it could have stayed connected to your genset when the "shore power" came back on line and stayed hooked up, throwing whatever amps the pole transformer could feed into the generator rectifier or control panel... you can probably go after the manufacturer of the transfer switch. Contact Generac to find out what may have been damaged, they'll probably recommend a tech to check out your generator and repair whatever got fried.
If you're doing a self-imposed lockout instead of an automatic switch (we did that for a number of years), ANY time you do a manual change (Line to Generator, Generator to Line) you NEED to have a "Zero Condition" between powering up the "live" side... Everything OFF, then power up the generator with shore power off, then everything off, and power up the shore power with the generator disconnected... otherwise you can get into the (destructive) issue of being out of phase which WILL cook things tout suite...
When I was on the bridges, there was a 20 second interrupt before the generators in our power house (GE Turbine units) kicked over to supply our facility... time to wind up, make sure the generators were in sync, then connected to a proven dead incoming line... and then when shore power was restored, the contactors killed everything for a 10 second time span before shore powere was connected to our facility, so there wouldn't be a conflict between the phase of our plant and that of the power company. Since the power was stepped up and down from 12KV, it would have been some pretty impressive fireworks otherwise.