What is the correct way to determine whether a generator is internally or externally grounded?

You can check with an ohmmeter and determine whether the field is grounded internally or externally. You must identify the terminal on the generator. Of the three terminals, the non-insulated one is the ground connection. The two insulated terminals are different sizes, the larger of which is the armature connection. The battery and the leads to the regulator must be disconnected for this test. The ohmmeter test requires taking a reading and then compare that with what happens after removing either brush.

With the brushes in place, connect an ohmmeter to the field and armature terminals. You should have a nearly perfect continuity reading. By removing either brush, you are breaking continuity of the heavy windings in the armature between the brushes. There is no need to determine which brush is which. An internally grounded generator will lose continuity when either brush is removed. The ohmmeter will show several ohms of resistance for the field coils, the continuity does not have to be perfect. You are only concerned with any change after a brush is removed.

False readings can happen due to damaged internal insulation, so do a second check. With the brush still removed, connect the ohmmeter to the field terminal and the case ground of the generator. On an externally grounded generator, this should show no continuity between the field terminal and the ground. On an internally grounded system, continuity between the field terminal and ground will exist and not change from the first test. If there are any variations in these readings this indicates an internal problem with the generator and you will need to get it rebuilt.

Thanks!