Kohler Marine generator instability

[timlesage]

I purchased a boat with a Kohler 23EOZ deisel 240V generator. The boat is just over 20 years old, as is the generator. When the generator is started the voltage is very erratic, with the voltage needle bouncing anywhere between 210V and 260V with no load yet applied. The LED panel light on the generator also flickers at a rate corresponding to the voltage fluctuations. When this is happening the engine itself is running very stable with consistent RPM's. When the AC devices are powered up one at a time the voltage fluctuations continue. The LED on the inverter flickers at same rate when that is powered up, and the erratic voltage is very apparent when the HVAC devices are powered up as you can hear the fan ramping up and down in speed at same rate as voltage change. This abnormality was first flagged by the boat surveyor who recommended inspection by a qualified contractor. I had a very reputable company come and inspect and their first recommendation was to change the belts and voltage regulator, which they did. That did not solve the problem so they did further testing. The results of those tests suggested that the insulation on the windings was bad and the cause of the problem, which now requires an expensive repair/rebuild to treat that. I did have another mechanic check it out for sort of a second opinion. He noted that when nearly all of the AC devices are powered up and a high load (greater than 30A) is created the voltage suddenly seems to stabilize and does not fluctuate anymore. The needle is stable, the LEDs no longer flicker, and the HVAC fans run consistent. He tells me that this fluctuation is normal and there is not a problem with the generator. I then had a 3rd mechanic check it out, who agreed with the surveyor and first mechanic that there is a definite abnormality and a 50V fluctuation should not be happening. I am not happy with the thought of an expensive winding repair, but if it will truly solve the problem then it is certainly worth doing. The thing I am hoping someone on this forum can help me understand is why the voltage would become stable at a certain point of load if the problem was the winding insulation since that flaw should remain at any degree of load. I should also point out that once the voltage does become stable I can then power down just about everything down to negligible load and the voltage still remains stable. This stability continues right up until the point that I actually shut down and restart the generator diesel engine, at which point the process starts all over again. I can share a video of the issue with anyone who is interested, any thoughts or advice would be greatly appreciated.