In IEEE 1584 / 70E it indicates that panelboards fed from xfmr's below 125Kva with a 208V secondary that there is not enough energy to sustain an arc? was there ever any testing done to substantiate this? When you do your short cirucit / arc flash stuies do you include these types of installations or is it typical to provide a arc-flash hazard level as indicated in 70E-1584?

Yes there was testing, in fact our Forum host was involved. File is too big to attach but I am sure you can find it if you search this forum.

Lots of discussion on this in the forum.
Use the search feature and you should find a lot of previous discussion.
It may help or you may have already done that, anyways there has been some testing by those on this site. Hugh Hogland or Mr. Phillips and Zog have discussed this. I know that PGE did some testing a few years ago but I do not have the results. The way I heard it was the arc could not be substained but not sure in a box or the DOE.