The bad:
My intention to put a steady load on the engine with a grid tie inverter is, at least for now, not achievable. This means the engine will only be used as an emergency power backup system and it will not be usable for house heating as I had hoped. I do not wish to turn off the hydro feed but even if I did, the steady state power consumption here is between 1000W and 1500W for the majority of the day and that is (IMHO) insufficient for a load for the engine. My average daily consumption based on the utility bill is between 40 and 50 kwh. There are also the occasions when using the kitchen or washer/dryer where power requirements exceed generating capacity. To run off grid would require a setup that contains a fair sized battery bank and an inverter that assists the generator when needed. This of course is achievable with the proper injection of cash into the project but I don't feel it will be satisfactory as compared to being hooked up to the grid all the time.
The result:
I will finish the odds and ends that still need doing but the project is, for all practical purposes, finished until I can figure out how to put a continuous load on the engine that does not involve talking to the utility company or the electrical inspector. At the moment I can't see any solution short of somebody offering me a truckload of slightly used deep cycle batteries for the cost of providing them a good home. I could put a resistive load (heater) on the engine but that just seems wrong.
There are a lot of other projects around the house that have been neglected and it is time to catch up on those.
Jens
It sounds like your engine might be a little big for the load on it. Just a thought, since most of my load is charging batteries and a battery charger automatically shuts down as they charge up, I use a rheostat on an automotive alternator to set the charge at a rate that suits the load on the engine at a constant rate. That way you could set a constant load that coincides with the minimum load. Is that clear as mud?
If the electrical load from the house should go up to the point that you need the full power from the generator, maybe you could put in a relay to cut out the alternator all together. Then when the load from the house drops, the alternator would cut back in. Somebody should be able to come up with some type of sensor that would sense a drop in voltage to activate the relay and turn off the alternator. Of course you could also shut off the alternator manually when you know the load will be big.
I have 6 golf cart batteries and charge about 30 to 35 amps without a regulator. These are enough that the batteries do not overcharge or even heat up. I only add water about every 5 or 6 months.