NickParker: All motors - regardless of type - have built-in eccentricities in both the electrical and magnetic circuits. These irregularities lead to a difference in shaft potential between one end and the other. Usually, the higher potential will occur at the end where the outside connections are made to the stator (or, in the case of DC, rotor) windings. To break up the circuit that now exists through the shaft and bearings to ground, we insert an insulating material somewhere. Different manufacturers approach it differently: if we break it up at the NDE, we (most likely) interrupt current flow where it's being generated - but we don't necessarily protect the machine from currents created by the driven equipment (think static electricity from a drive shaft rubbing on something, or a plastic material being processed in an extruder). To fix that issue, it makes more sense to place the insulation (and grounding method) at the end closest to the driven load.
All sources that are power electronics (compared to "line" sources) will generate irregularities in the waveform. It's the nature of the beast. These irregularities will exacerbate any irregularities inherent in the machine design, making circulating currents more likely. The soft-starter's argument is that the motor isn't actually operating CONTINUOUSLY on a drive, so it shouldn't matter. I'd be tempted to tell them fine - we'll sell you a car without doors, windows, or roof because it almost never rains or snows.
If you're worried about circulating currents damaging your bearings, force the vendor to include both an insulated bearing arrangement (at one end or the other, or both) AND a suitable grounding connection to the shaft - which is going to be different for high-frequency switching mechanisms like drives than it would be for the "grid" style power source.
Whether the Y-D starter requires an insulated bearing depends on how the switch is made from one configuration to the other. If it's basically a mechanical switch action that just "reconnects" the winding then no ... strictly speaking, an insulated bearing is not required (for the start method). It's still a good idea from other perspectives, though. If the reconfiguration involves some sort of IGBT or thyristor (or even diode bridge) method, then the insulated bearing is a MUST.
Converting energy to motion for more than half a century