I agree that the compressor is at fault - by your process of elimination.
Whatever happened inside that compressor was electrically catastrophic. There's no way of knowing what type/form of physical damage it took on, so I can't offer any explanation. It's enclosing a fifty year old mix of oil, possible acid and moisture to go along with its revealed insulation failure.
That Fluke 289 looks like some fancy gadget compared to my 116. However, it doesn't look like it has a "megger" feature on it. So, it can only provide a little 9 volt battery, which is a pittance of force to push through an insulation failure if that failure is "iffy". Yet, it still gave you that initial 1 MΩ reading and is a sure sign of a problem.
Obviously the 208 volt source power pushes through the problem far more easily - enough to blow fuses. I'm sure a megger would also expose the problem quite readily as well.