I created a bridge that include eth0 and the bridge in preparation to setup Qemu with a bridged interace to the network.
ifconfig eth0 promisc up
brctl addbr br
ifconfig br netmask up
I have echoed 1 in /proc/sys/net/ipv4/conf/eth0/proxy_arp

I finish setting this up and evrything is fine. I ping the default gateway of the machine in the network attached to the eth0 interface and I get excellent replies.

Here is the problem, I vnc to and once I do that, I loose communication with

I recreated this scenario several times and same thing happens everytime. It works for as long as I am not passing real traffic, then it stops working as soon as I try to send and receive real traffic from the host ( I tried this with iptables running and not running, same result.