Thanks for all of your inputs. I get the message: ....'NO!' ....'You 100% CANNOT, AT ALL use an equipment ground for the neutral of a 120v circuit.' However, that still did not answer my question: "How will I be compromising safety? Why is it 'potentially extremely dangerous to do so'?" But, after a little thought, I can see a case where that hookup could be very dangerous. I will share my example just in case someone else has the same question in the future. Here is my imagined case: In a correctly wired 4-wire 220 volt system it is permissible to wire 120 circuits in the equipment as long as the return is via the neutral (white) wire. In this case you can imagine any one or any combination of the four wires becoming open. No matter which are open, there is no immediate danger, without at least some other fault in the machine. No dangerous single point of failure. In a 220 volt machine wired with 3-wires there is also no single point of failure. Any combination of the three wires can be open without 'immediate' danger. Again, no dangerous single point of failure. If, in the 220 volt machine wired with 3-wires, one wires a 120 volt circuit with the equipment ground as a return there is a potentially a big problem. If the equipment ground becomes open on its path back to the panel box, then the only path for the return current to flow in the 120 volt circuit is to the case and then through anything or any person that gets it to earth ground. That is hazardous!

Great! Thanks for your patience in reading all that detail. Thanks for your responses. Further: I will run a full size (4 AWG) NEUTRAL. What size GROUND should I run in the house to shed panel conduit... a green insulated 6 AWG stranded copper maybe? I will use a 70 AMP breaker in my house panel. Another person gave the same recommendation. Should I make the associated step-down for the main breaker in the shed panel from 100 AMPs to 70 AMPs or leave that as described? Regarding "install a ground system (2 rods typically)": My house was built in 2005 with one 8' ground rod wired into the main house panel by the electrician. Electric co-op employees stood on that single bar when they connected my meter to the power pole. Is the "2 rod" ground system new since 2005 or did everyone involved in energizing my house leave me with something that is dangerous, illegal, bad? Thanks again.

I know it is wrong to not use AFCI breakers now days, but just putting afci on the 3 new circuits without changing out the whole panel isn't any better than playing Russian Roulette, IMO. Especially, since you would be putting the AFCI on the new wires instead of the potentially old ones that may actually need it. If you have smaller than a 40 circuit panel, no AFCI breakers at present, and may have plans in the future for more electrical such as a hot tub or landscape lighting, then now would be a good time to at least think about the bigger picture, and either change to a larger panel or add a subpanel. BECAUSE, by the time you change all the breakers to AFCI, the time and money spent won't warrant not spending the extra $200 on the new panel. Otherwise, 210.12(B) Branch Circuit Extensions or Modifications -- Dwelling Units. In any of the areas specified in 210.12(A), where branch-circuit wiring is modified, replaced, or extended, the branch circuit shall be protected by one of the following: (1) A listed combination-type AFCI located at the origin of the branch circuit (2) A listed outlet branch-circuit type AFCI located at the first receptacle outlet of the existing branch circuit Exception: AFCI protection shall not be required where the extension of the existing conductors is not more than 1.8 m (6 ft) and does not include any additional outlets or devices. ... 210.12(B)(2) Would be more in line with the actual benefit of an AFCI in this situation, since protecting one cable all the way back to the panel while the other ten old cables that it is run next to are not protected is a bit futile. I would also add a blank face AFCI at the beginning of the lighting, or other circuits that don't start with a receptacle. You could also put the old circuits on the quad breaker, and then put the new circuits on a full-spaced AFCI breaker if you want to please the inspector with a code run-around ;D

I thought about the conductor/resistance part. I dismissed it for a couple of reasons and I hope my logic was sound. Tell me if it is not. First, largest length of larger conductors is the drop or underground feed between the transformer and the home. The length of these are short compared to the conductors between the meter an the use point. The contribution is negligible. There are some homes that have a long way between the transformer and the home and maybe the OP has this situation. Second, the power loss in the drop or underground feed does not count because the meter is measuring power. In this light, the homeowner will save the power company some power by buying a larger service. The growth of power consumption in residential sites grew for so long ,and the bias to making bigger when replacing equipment is so strong, that increasing service size is almost a knee-jerk reaction. Will we ever see the point when someone needs to replace a rusted-out 200A main panel and meter and says, or the electrician says, don't need 200A, you could probably get away with a 125, but lets oversize and go with 150? Recently, I arranged a service size increase in my dad's home. I did not want to. He had 125 A service going back decades, but I think the 1959 original was smaller. The nominal 200A combo main panel/transfer switch that I chose had two choices for main breakers, 200 and 150A. Darn it! That forced a complete main service replacement. On the positive side, adding the remaining stuff did not add much to the overall cost of genset instalation. Ron, in your situation, if they are really bothersome, I'd be tempted to sign up for the energy savings program and then watch them scratch their heads after showing up. That kind of event might generate useful feedback to the sales part of the organization from their own field people (that is not getting trough from you). Once I got a call from a long distance telephone service provider asking me if I wanted to sign up. I thought for a second and said, go ahead. This was not too long after deregulation of that part of telephone service. At that moment, I was sitting at a university phone :-) The university had a system that went out and compared rates from two or three long distance services and put your call through the best way. I don't know what happened as a result of my saying yes to that caller. I am reasonably sure it is not what he expected. Was I being mean-spirited? I don't think so. I did benefit from a little amusement. I did not see my saying no and explaining likely being productive. If lucky, maybe I saved hundreds of other people on the university's exchange from nuisance calls and forced a productive change on their marketing end before they got too far into it.