Hi - just seen this post. Testing Class 2 appliances does cause a lot of confusion, and there has been a lot of debate on other forums about this issue.
When the insulation test is carried out on an appliance, we're checking for a breakdown of insulation between live/neutral and the metalwork on the appliance. So, for example, on a drill we'd be checking to see if the chuck/drill bit would be live when we operate it.
The important point here is that live and neutral are joined together inside the tester (so that there's no potential difference between them) and we measure any breakdown of resistance by putting the probe (clip) onto a metal part of the appliance. This is different from installation testing on a building (PIR) where an insulation is carried out BETWEEN live and neutral.
If you think about it, this is why electricians have to go around unplugging all the appliances and removing all the light bulbs before an insulation test between live and neutral, and why a drill doesn't start up when we insulation test it during a PAT Test.
The clip HAS to be attached to a metal part in order for the test to have any value. If there is a breakdown of insulation, current will flow back down the test lead and so the PAT machine will indicate a fault.
On the same token, if we don't connect the clip to anything at all, no current will flow down the test lead, and a PASS will be indicated, even though we're not testing anything! I have witnessed some so called 'professional' PAT Testers testing things like wall wart power supplies by plugging them in, pressing the insulation test button, and then 'passing' them when the insulation test comes back as a pass!
If there is no metalwork on the appliance (such as a plastic hairdryer or a laptop power supply) then there is no need to do an insulation test. And, because it's Class 2, you don't need to do an earth test either, which is why we say that an inspection is ALL that is required on a Class 2, plastic appliance.
If you have a Class 2 appliance with some metal parts the you will need to carry out a full inspection, followed by an insulation test.
It is normal practice to refer to Class 2 appliances with metal parts as 'DOUBLE INSULATED' and those with all plastic parts as 'ALL INSULATED'
Hope this helps!