Here is something I have done a lot when out in the boonies.
A buddy's buggy dies because the battery is DEAD because of a faulty altenator and you are hundred miles from base camp through two hundred foot sand dunes.
What to do?
Start up the good buggy and idle at about 1500 rpm and remove the battery (yes, while it is running)
Put the charged battery into the disabled buggy and start.
Put the discharged battery in the good buggy for charging while you continue your trip.
Swap as needed.
I have done this many times and it is a well known fix.
It has never caused problems for the good altenators.
So what is the difference between doing the above and switching from battery to battery or switching to off with the motor running?? Why do some people get away with it and others have horible stories to tell??
Here is what I think----
In the OFF position the multi battery switch breaks the conection between the batteries and the output side of the altenator.
The input side of the regulator may still see 12 volts because of improper wiring.
The regulator tells the alternator to increase output but does not see an increase in voltage so the regulator increases voltage to the field untill bad things happen.
You could even have a problem where the regulator sees batery #1 and is charging battery #2. That might cause excessive gassing when not run in the BOTH position when charging.
You may disagree, but that doesn't change the fact that if you remove the battery while the alternator is running, the sudden surge can, and quite frequently will, damage or destroy the alternator. This is why they make switches with field disconnect circuits.