While at the bank today, I was able to speak to a gentleman who was servicing their ATMs.
I asked him about the machines rejecting to accept certain notes. he explained that it's mostly about the clear window strip. If it's scratched badly the machine won't read it properly some reject it. Also well known is the top of the $5 notes that are worn and clear plastic (polymer) shows through which will also be caught by the machine and rejected.
Also, any notes that have been taped, torn, and missing pieces, and even those that are severely creased or have corners folded will be rejected.
Also, if you stamp covers ANY of the CLEAR part of the note, it WILL be rejected.

He tells me that the "older" machines are more "mechanical". There are new machines that will soon be arriving that are mostly "digital". The changeover will be expected to take place over 3 years