An expression in Valid If setting must return either one of a list or a yes/no value and you cannot have both at the same time.
So to make the second expression into a list try
insulation_resistance[side] - SELECT(<< whatever you already have>>)
This (should) gives a list of allowed values rather than invalid values.
Not sure of the exact relations of this with the first expression but I guess it is
IF( //rather than IFS
[winding_type]="Two Winding Transformer",
LIST("HV-Ground","LV-Ground","HV-LV"),
insulation_resistance[side] - SELECT(<< whatever you already have>>) // the above expression as the else value
)