the default gateway is the distribution switch. the ip is on an SVI on the distribution switch.
so i entered:
int vlan 32
no ip proxy arp
and everything on vlan 32 dropped.
vlan 32 is configured like this:
int vlan 32
ip address 10.1.32.1 255.255.255.0
What did the devices in vlan 32 have as their default gateway ?
Was it the vlan 32 IP address ?
If so it should not have dropped connectivity. If the devices didn't have a default gateway set then disabling proxy arp would indeed stop communcation outside that vlan.
Is the subnet mask on the servers the same as on the vlan interface ie. 255.255.255.0 ?
Edit - presumably the servers are using 10.1.32.x addressing ?
If the servers have the right IPs with the correct subnet mask and are using the correct default gateway then this shouldn't have happened.
Basically proxy arp is used when a client arps out for a device that is not on it's own subnet. It would do this for a number of reasons ie. -
1) the client has no defautl gateway set so it thinks eveything is local ie. every other device is on it's subnet
2) the actual subnet is a /24 but the client has been configured into a larger subnet eg. a /23 for example
if the above happens then the client arps out for devices that are not actually on the same subnet. If proxy arp is enabled on the L3 interface for that subnet then the L3 device can respond to the client with it's own mac address. The client then sends the traffiic to the switch thinking it is sending traffic directly to the destination device and the switch actually then forwards it on.
But like i say, with the information you have provided disabling it should not have stopped connectivity to remote subnets.