Great read, love the "hey what does it need?" approach rather than the "how is this done?" approach. Tut Systems had bought one of the first "hotel internet" companies back in the 90's which used a similar approach by subverting the ARP protocol, when you connected any thing you tried to ARP for it would respond "Yup, that's me! Send me your packets" and you would end up at the "Give us your credit card" signup.
The nice thing is that at this level networking is really simple. And if you can get access to the internals of switches to craft behaviors at that level, it is a pretty good way to go.
Proxy ARP it's a thing and it is exactly what you've described :)
And if by proxy DNS you mean you'll subvert ARP to reach a DNS server... that's proxy ARP. DNS is a few layers above :)
Definition:
Proxy ARP is the technique in which one host, usually a router, answers ARP requests intended for another machine. By "faking" its identity, the router accepts responsibility for routing packets to the "real" destination.
The nice thing is that at this level networking is really simple. And if you can get access to the internals of switches to craft behaviors at that level, it is a pretty good way to go.