Would Host A or Host B be able to communicate with D.G. using setup setup? Assume all three hosts are on the same access ports (same VLAN).
I have a feeling that at least Host A would be able to communicate.
Host A 192.168.1.10/25
Host B 192.168.1.130/25
Host A: configured DG 192.168.1.1 looks like it belongs to same network so it starts ARP. DG receives it and responds it as the ARP request contains only IP address and not subnet information. DG sees question: are you 192.168.1.1? And replies: yes I'm. Host A learns its MAC address and starts L2 communication.
Host B: can't even set up desired DG as it falls outside of it's local subnet?
Yes, your analysis of the situation is basically correct. For host A, the default gateway is reachable within its own subnet. For host B, the gateway address is outside its subnet. Well-behaved operating systems won't even allow you to configure a default gateway that is outside the host's subnet (read - not Windows ).
A possible issue can arise with the behavior of the default gateway. If host A uses it to send packets to host B, the gateway will be slightly surprised because from its viewpoint, both A and B are on the same subnet and should be able to communicate directly. Default gateway recognizes this by the fact that the received packet would be sent out the same interface through which it came in. So what will happen is that while the default gateway will forward the packet to B, it will also send an ICMP Redirect message to A saying "to communicate with B, send packets to B directly". This may confuse host A - depending on its IP driver implementation.
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