"Listerflicker" is a well known problem. The voltage variation is due to the slowing of the engine during the compression stroke, and acceleration during the power stroke. An AVR fed off the mains will help with this, but not completely solve it, especially for 60 watt or less incandescent bulbs. (Higher wattage bulbs have heavier elements that stay hot and can "ride through" the voltage changes better.) The flicker is worse for the larger heads (ST5 and ST7) with an AVR, since the larger inductance of the rotor field windings adds time lag to rapid changes in excitation. SOM or heavy flywheels help reduce Listerflicker, as much as an AVR on an ST-3, and therefore even more so with the ST-5 and ST-7.
Better quality CFL or electronic ballast fluorescent lights will regulate the voltage to the lamps so you won't see any Listerflicker.
It's best to plan on using inverter power for ALL lighting, even in your shop, and save the Listeroid/ST power for motors and shop tools.
I am starting to rethink the entire setup, I have inverter power (3000watts pure sine wave) running from four 6v L16 batteries for 860ah @12v, I am thinking maybe I should scrub the ST plan and go to a good 12vdc alternator and just charge the batteries instead.
The inverter is currently wired into the shop, house and well pump, and I can currently run anything I need to run from that inverter without a problem, but I had planned on using 120vac from the ST through the built in charger on the inverter to support the batteries on cloudy days or periods of high loads and have the ability to run all of the loads from the ST and shut down the inverter if needed or if there was an issue.
Going to an 12vdc alternator would resolve the flicker issue and the potential issues with any sensitive electronics, guess I could keep the ST inline and wired up so if everything else crapped out I could throw a couple switches to disconnect the inverters and run off of the ST in a pinch.