Old but still good technical note from Analog Devices on USB isolation. Link here (PDF)
Currently, iCoupler® digital isolation technology is capable of transferring data at rates ranging from DC to about 150Mbps, which is adequate for transferring serial data to support low (1.5Mbps) and full (12Mbps) speed modes of USB. There are three places where isolation could be introduced, in the differential transmission lines D+/D–, between the controller and the transceiver, and between the controller and the system controller. Unfortunately, the trend toward higher levels of integration incorporates the transceiver and controller interfaces into the system controller, leaving only D+/D– data lines available outside of the controller for isolation.
This is an extremely challenging place to try isolation because there is no flow of control signals, and data is a combination of single ended and digital signaling. With current isolation technology, the most practical place to isolate is between the system controller and a stand-alone USB controller/transceiver where signals can be unidirectional and logic level. In many cases this means bypassing inboard controllers and adding a discrete USB controller.
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