Propane or natural gas generator against the rules?

Talk to the "local ordinance folks" and explain that you can't meet the criteria, is a variance possible?

Alternately, have the wiring installed, but use a portable that you drag out and connect when needed.

Good luck,

Ev

"A guy I know said he heard of people having generators installed in a spare garage bay and providing ventilation via permanent piping to the outside."

Yes, this can be done. It requires a flexible intermediate to the hard pipe to prevent vibrations from the generator stressing pipe/generator exhaust header. Tuning will likely be required depending on length/size of discharge. This is often done industrially.
Sorry, but I can't give any sources. It IS less of an issue with natural gas/propane. Wall penetrations will be determined by your AHJ.
If you have indoor space for the generator, you can expect longer life from the unit.

I will have to start making phone calls, thank you for your help.