There can only be one point in the system where neutral and ground wires are joined, and this is usually in the main panel. Therefore, you must lift the bond from the generator, or disconnect the ground wire from the generator to the transfer switch.
If you lift the bond on the generator, you can run both ground and an insulated neutral back to the transfer switch. You will also run ground and insulated neutral from the main panel to the transfer switch, and ground and insulated neutral to the subpanel from the transfer switch. Note that neither neutral nor ground are switched in the transfer switch. The generator can optionally be grounded to a rod.
If you cannot lift the bond, disconnect the ground wire to the transfer switch at the generator (or don't run a ground wire at all). The subpanel will still be grounded from the unswitched ground wire from the main panel. The generator cannot be grounded to a rod because this would tie the neutral to ground in a second location through the bond.
Does the sub-panel seem over loaded? If so, I could keep the water-heater in the main panel and free up space in the panel another way.
Seems reasonable to me. Most of the equipment won't draw anywhere near the overcurrent rating, at least not during normal operation. Motor loads will draw a higher current on start, but you shouldn't have a problem.
I know I need four-strand wire to run to the sub-panel (2 hot, neutral, ground) but copper or aluminum and what gauge?
You can use either copper or aluminum, though I recommend copper for DIYers. Copper is quite a bit more expensive, but it's easier to work with (in my opinion). If you feel confident working with aluminum conductors, you can save some money using it.
I've covered the topic of feeder sizing here, so I won't go into detail. If you're using copper, you'll want to use 3 AWG conductors. If you choose to use aluminum, you'll need 1 AWG conductors.
If you want to run a single cable, instead of individual conductors in conduit. You can buy what's called 3-3-3-5 SER cable (1-1-1-3 for aluminum), which will contain three 3 AWG conductors (hot,hot,neutral) and a 5 AWG grounding conductor.
When I run the wire along the floor joist, does it need to be secured to the joist or can it just hang there and rest on the drop ceiling? Seems like it should be secured to the joist with wire hanger or something.
You'll have to attach the cable to the joists, using 1 - 1 1/4" staples or other approved means. Check the packaging, to make sure they are rated for the size cable you're using.
What are the things about this project that I don't know that I don't know. :) These are the scary things IMO...i.e. the questions I don't know enough to ask.
The cable you'll be working with is thick and heavy, and it's not going to be fun pulling it. You'll probably want a couple helpers, to help you wrangle it.
Make sure all your connections are tightened to the manufacturer's specified torque.
If you choose aluminum conductors, make doubly sure you tighten the connections. And don't forget the anti-oxidant.
Come back a day or two after the panel has been put into service, and tighten any connections that need it.
Don't forget to remove the bonding jumper between the grounded and grounding bus bars.
You'll need clamps big enough for the cable, to secure it to the panels.
should I put a 100 amp breaker in the sub-panel to act as the "main" for the sub-panel? Or is the 100 amp breaker in the main panel sufficient?
You can usually pick up a main breaker panel, for about the same price as a main lug only (MLO) panel. In my opinion, unless the secondary panel is next to; or within sight of, the main panel. You're better served to install a main breaker panel. It simply offers better protection during maintenance, or other work within the panel.
For example. If you turn off the feeder breaker in the main panel, and start working in the secondary panel. Somebody could easily come along, and flip on the feeder breaker. Since you can't keep an eye on the breaker, you can never be sure the panel will be dead. (unless of course you're using a lockout like you should).
If the secondary panel is in a separate building or structure, then you either need a main breaker, a main disconnect, or the ability to disconnect all ungrounded conductors within 6 or less hand moves.
Best Answer
The floating neutral is good news, but you don't need a ground rod for this
The fact that your generator has a floating neutral is actually quite fortunate for you, as breaker-interlock-based transfer setups are largely incompatible with generators that have bonded neutrals (the more common case). However, since you're plugging your generator into your house, which already has a grounding electrode system (ground rods, etc), you don't need to add a ground rod at the generator, as the house supplies both the grounding electrodes and the neutral-to-ground bond point.
As to the inlet, since it's your main panel, you can land both wires on the same bar
A common "shortcut" in main panels (esp. in residential work) is to slobber all the neutrals and grounds onto the same bar, since that's where neutral and ground meet. Since most panels where this is done don't have separate ground bars fitted to begin with, you're left with little choice but to continue this practice, unless you wish to buy a ground bar kit for your specific make and model of panel and add a separate ground bar.