I have seen similar faults before and I would look into the grease you are putting on the fingers of the breaker during service, it might of changed since 1980 and the old grease is still on the stabs. Some of the greases don't mix well and you might have this building up over time resulting in...
I have used Scott Foam before during overhaul, heavy dust conditions to protect running motors from the dust and dirt. That might just be what your looking for.
It's a condenser bushing that will limit the current to the Neon light. As above the voltage is not limited so if you remove the neon lamp form the circuit you will get zapped +. The Lights on the other hand are a old time passive ground detector circuit, it is relay only reliable for low...
If you have a b auxiliary contact available you might use it to short out the neutral CT input when the feeder breaker is open. This should make the inspector happy but I don't know the complete protection circuit and you will have to look into that.
