Let's look under the hood to see how this generator works:
Here: a color illustrated schematic of your generator
Notice MW1 and MW2 in the red square boxes. These are your two windings that output your 120V. Each has a maximum of 14.6A (1750W)
Notice the switches, up is green and down is orange. This is the 120V/240V switch you move to select which outlets have power.
Notice the blue square at the bottom of MW1. This is where the AVR samples a portion of MW1 voltage. This is all the AVR knows, the voltage of MW1.
Now, when your switch is on 240V you are using the green and purple wires on the L14-30R connector. They are common to the black wire. MW1 120V is at the purple and black wires, MW2 120V is at the green and black wires. 240V is at the green and purple wires. 240V at 14.6A is 3500W.
I believe your microwave is being powered from the green and black wires, MW2. This is an unregulated 120V 14.6A (1750W) leg. The AVR is looking at the purple and black wires, MW1, so he's clueless to your microwave's existence. This is one flaw of this design.
Let's look at the 120V side. When you move your selector switch to the 120V position you are now using the orange wires powering the TT30R connector. This places the two windings MW1 and MW2 in parallel. Two 120V 14.6A windings in parallel will provide you 120V 29.2A, or 3500W.
You can get a regulated 120V 3500W using the TT30A connector, but the L14-30R is limited to 1750W regulated on MW1 and
unregulated 1750W on MW2. This doesn't matter if you are powering only 240V devices. The AVR sees that. The problem occurs when you split them as you did. You're not the 1st one to stumble onto this issue, and you won't be the last.
I hope this helps
