When you turn off ARP on a netdevice then the first packet always goes
out with a dstMAC of all zeroes. This is because the first packet is
used to resolve ARP entries. Even though the ARP entry may be resolved
(I tried by setting a static ARP entry for a host i was pinging from),
it gets overwritten by virtue of having the netdevice disabling ARP.

Subsequent packets go out fine with correct dstMAC address (which may
be why people have ignored reporting this issue).

To cut the story short: 

the culprit code is in net/ethernet/eth.c::eth_header()

----
        /*
         *      Anyway, the loopback-device should never use this
function...
         */

        if (dev->flags & (IFF_LOOPBACK|IFF_NOARP))
        {
                memset(eth->h_dest, 0, dev->addr_len);
                return ETH_HLEN;
        }

	if(daddr)
        {
                memcpy(eth->h_dest,daddr,dev->addr_len);
                return ETH_HLEN;
        }

----

Note how the h_dest is being reset when device has IFF_NOARP.

As a note:
All devices including loopback pass a daddr. loopback in fact passes
a 0 all the time ;-> 
This means i can delete the check totaly or i can remove the IFF_NOARP

Alexey says:
--------------------
I think, it was me who did this crap. It was so long ago I do not remember
why it was made.

I remember some troubles with dummy device. It tried to resolve
addresses, apparently, without success and generated errors instead of
blackholing. I think the problem was eventually solved at neighbour
level.

After some thinking I suspect the deletion of this chunk could change
behaviour of some parts which do not use neighbour cache f.e. packet
socket.

I think safer approach would be to move this chunk after if (daddr).
And the possibility to remove this completely could be analyzed later.
--------------------

Patch updated with Alexey's safer suggestions.
Signed-off-by: Jamal Hadi Salim <hadi@cyberus.ca>
Acked-by: Alexey Kuznetsov <kuznet@ms2.inr.ac.ru>
Signed-off-by: David S. Miller <davem@davemloft.net>