System Information
This was reproduced on both windows 7 and ubuntu linux
Blender Version
Broken: 2.70 RC1
Worked: 2.69
Short description of error
When you link-duplicate a proxy to a linked library object, the duplicated object no longer is a proxy
Exact steps for others to reproduce the error
Link an object from another .blend file.
Create a proxy out of it.
Link-duplicate the proxy
The duplicated object was correctly a proxy in blender 2.69, but in blender 2.70 RC1 it seems to be a duplicate that is no longer actually a proxy, only a multi-user mesh.