Sometimes it takes genius to see the blindingly obvious
Yet you can't see the isolation of the neutrals..?

The switch breaks the shore neutral from inverter when wired in that fashion because it isolates the outlet circuits black & white from the vessels AC system..
So long as the boat is NOT improperly wired, so the AC white and AC green ground are tied together on-board, the wiring diagram can work and there is isolation of the neutral. Is it a "preferred" way to wire it, no.
FWIW perhaps 98% of the boats I work on are wired so the inverter could power the entire AC panel. I have yet to have a customer who has complained of killing a bank by leaving the battery charger or water heater on when turning on the inverter. If you leave the water heater on your fist indication will be the inverter fan and pretty soon after the low voltage alarm on the inverter will sound. This does not mean the bank is dead just that you hit the low voltage threshold as you can with any high amp draw. It's pretty simple to get into the habit of killing all AC circuits before disconnecting shore power, and this is how it should be disconnected..
I find it interesting that Bill routinely argues the 1/2/BOTH is "so simple" it does not need an ACR or Echo charger to make it easier, but he then insists that leaving the H20 heater on, or the battery charger on, is so common that you need to cut buss bars apart and use a 4 pole AC transfer switch. Nothing wrong with that, but it is very similar to simplifying the 1/2/BOTH with an automatic charge distribution device, simplification on the user end but more installation and labor on the installation end..
Proots' diagram is not far off an ABYC accepted external source selection wiring diagram except that is "source" is the "outlet circuit" not the entire panel. He will need to wire carefully, and make sure the white/neutral he cuts into is actually for the outlets, and not something else, to ensure complete isolation, but it can quite easily be done.
Seems to me that if you PROPERLY disconnect from shore power, which should always include shutting off ALL AC loads before unplugging, then you turn the inverter on and then flip the OUTLET breaker to on, it is pretty simple. Most marine inverters designed for permanent installation use a remote panel to turn on. So before pressing "INVERTER ON" a quick glance at the breakers is about as simple as it gets. No more difficult than a 1/2/BOTH that "does not need an Echo or ACR for charging simplification"....
Because the rest of us are apparently not as "genius" as Bill, perhaps he could draw where the shore neutral and inverter neutral are tied together in Proots' system..?