layer2 tunneling with proxy arp

Has anyone used proxy arp to do a layer 2 tunnel?

I had this idea and wanted to know if anyone had done this already.

Basically on two cisco routers, set up  gre between, then do proxy-arp
on both of them and assign the same lan block on both, then do
individual host routes for each host on either side and turn on proxy
arp.

any problems with this? it was just floating in my head recently

thanks.
Lawrence