Ill add my .002 on this..
Heat sinks are generally designed around steady state conditions where thermal equilibrium is achieved (ie, thermal "impedance" equations). But for short time frames – like several cycles of AC, this model is extremely conservative. In this case where a fuse should trip fairly fast (i.e., several cycles of AC or 30 msec), you need to use an adiabatic model ( Power*time equals M*C*delta Temp). Given the short time frame, the allowable power levels for a given junction temp are a huge amount larger than for the steady state equilibrium condition. As an example, a chunk of aluminum 6 cubic cm takes 5300 watts to heat up 125C in 33msec (2 AC cycles in the US). Steady state (and with a heat sink), the input power for the same temp rise would be a huge amount lower. Thermal run away.. not likely. The forward voltage in a diode drops with temp – the power dissipated drops as temp rises.
The safety of an earth ground needs to have a breaker in order to work. In general, the fuse must blow before the galvanic isolator does for the safety aspect to work. If for some reason there is not a breaker (Yikes..), I think I would want the galvanic isolator to blow up. Consider that if the isolator has 60 amps flowing through it, somewhere else in the circuit is dissipating 60amp *117 volts = over 7000 watts (not exactly.. but hopefully it shows the point). This other place in the circuit that is dissipating the 7000 watts is likely the wires and instead of getting shocked, you are possibly going to have a fire. My preference would be getting shocked over the fire as this sort of shock you have a good chance of just swearing about. Once shocked, you know there is something wrong.
In the five years or so I’ve been following sailboat electrical accidents, the only one I’ve heard about was recently described here where a kid was swimming in a marina near an outboard with AC on it. In this case, it is a GFCI which would have prevented this accident from happening. A normal fuse would have done nothing. Note that if the slip power would have had GFCI, the earth green wire would NOT have even needed to be hooked up to prevent the accident. I.e., someone could have just used a two wire extension cord and for the particular case, the GFCI would have tripped. It would not have mattered if the galvanic isolator was fried or not. GFCI works by a current imbalance between hot and neutral – and the imbalance current does not need to flow back through the green wire. The path through water back to the marina breaker box works just fine for tripping GFCI.
I didn’t see the plans for the diode isolator.. but if the diodes are rated for some high currents, the device probably works fine. If the fuse trips in the time frame its supposed to, I dont think a heat sink would be needed. But.. if the fuse trips slow (somewhat of a fault condition), then the heat sink might be necessary.. If I sold the boat, Id definitely remove my kludge..
If there is an accident on the boat such as a deadly shock or a fire, do insurance providers hold the boat owner responible for doing something "not to standard"? I think a lot of boats have wiring done by the owners and maybe they have a lot more to worry about than a garage made isolator.