diff --git a/source/blender/blenkernel/BKE_object.h b/source/blender/blenkernel/BKE_object.h
index 9ad20b6a586..13566be30b3 100644
--- a/source/blender/blenkernel/BKE_object.h
+++ b/source/blender/blenkernel/BKE_object.h
@@ -38,16 +38,6 @@
 extern "C" {
 #endif
 
-/* defines now, might become functions */
-
-/* proxy rule: lib_object->proxy == the one we borrow from, only set temporal and cleared here */
-/*             local_object->proxy == pointer to library object, saved in files and read */
-	
-#define OB_COPY_PROXY(a)	a->id.lib && a->proxy
-#define OB_IS_PROXY(a)		a->id.lib==NULL && a->proxy
-#define OB_DO_PROXY(a)		a->id.lib==NULL && a->proxy && a->proxy_group==NULL
-	
-
 struct Base;
 struct Object;
 struct Camera;
diff --git a/source/blender/blenkernel/BKE_scene.h b/source/blender/blenkernel/BKE_scene.h
index f7fa8436e4f..69ff6876acd 100644
--- a/source/blender/blenkernel/BKE_scene.h
+++ b/source/blender/blenkernel/BKE_scene.h
@@ -52,7 +52,7 @@ struct QuicktimeCodecData;
 				if(seqar) MEM_freeN(seqar);		\
 }
 
-
+/* note; doesn't work when scene is empty */
 #define SETLOOPER(s, b) sce= s, b= sce->base.first; b; b= (b->next?b->next:sce->set?(sce=sce->set)->base.first:NULL)
 
 
diff --git a/source/blender/blenkernel/intern/armature.c b/source/blender/blenkernel/intern/armature.c
index fe586fa4d0f..9268f593970 100644
--- a/source/blender/blenkernel/intern/armature.c
+++ b/source/blender/blenkernel/intern/armature.c
@@ -665,7 +665,6 @@ void armature_deform_verts(Object *armOb, Object *target, DerivedMesh *dm,
 	Mat4Invert(obinv, target->obmat);
 	Mat4CpyMat4(premat, target->obmat);
 	Mat4MulMat4(postmat, armOb->obmat, obinv);
-
 	Mat4Invert(premat, postmat);
 
 	/* bone defmats are already in the channels, chan_mat */
@@ -967,21 +966,25 @@ void where_is_armature (bArmature *arm)
 	}
 }
 
-/* if bone layer is protected, copy the data from proxy->pose */
-static void pose_proxy_synchronize(Object *ob, Object *proxy, int layer_protected)
+/* if bone layer is protected, copy the data from from->pose */
+static void pose_proxy_synchronize(Object *ob, Object *from, int layer_protected)
 {
-	bPose *pose= ob->pose, *proxypose= proxy->pose;
+	bPose *pose= ob->pose, *frompose= from->pose;
 	bPoseChannel *pchan, *pchanp, pchanw;
 	bConstraint *con;
 	char *str;
 	
-	if(proxypose==NULL) return;
+	if(frompose==NULL) return;
+	
+	/* exception, armature local layer should be proxied too */
+	if(pose->proxy_layer)
+		((bArmature *)ob->data)->layer= pose->proxy_layer;
 	
 	/* clear all transformation values from library */
-	rest_pose(proxypose);
+	rest_pose(frompose);
 	
 	pchan= pose->chanbase.first;
-	pchanp= proxypose->chanbase.first;
+	pchanp= frompose->chanbase.first;
 	for(; pchan && pchanp; pchan= pchan->next, pchanp= pchanp->next) {
 		if(pchan->bone->layer & layer_protected) {
 			
@@ -997,7 +1000,7 @@ static void pose_proxy_synchronize(Object *ob, Object *proxy, int layer_protecte
 			copy_constraints(&pchanw.constraints, &pchanp->constraints);
 
 			for(con= pchanw.constraints.first; con; con= con->next) {
-				if(proxy==get_constraint_target(con, &str))
+				if(from==get_constraint_target(con, &str))
 					set_constraint_target(con, ob, NULL);
 			}
 			
@@ -1064,10 +1067,10 @@ void armature_rebuild_pose(Object *ob, bArmature *arm)
 			BLI_freelinkN(&pose->chanbase, pchan);
 		}
 	}
-//	printf("rebuild pose %s, %d bones\n", ob->id.name, counter);
+	// printf("rebuild pose %s, %d bones\n", ob->id.name, counter);
 	
 	/* synchronize protected layers with proxy */
-	if(OB_IS_PROXY(ob))
+	if(ob->proxy)
 		pose_proxy_synchronize(ob, ob->proxy, arm->layer_protected);
 	
 	update_pose_constraint_flags(ob->pose); // for IK detection for example
diff --git a/source/blender/blenkernel/intern/depsgraph.c b/source/blender/blenkernel/intern/depsgraph.c
index 1cc3c702a1a..ce441e26116 100644
--- a/source/blender/blenkernel/intern/depsgraph.c
+++ b/source/blender/blenkernel/intern/depsgraph.c
@@ -71,6 +71,7 @@
 #include "BKE_mball.h"
 #include "BKE_modifier.h"
 #include "BKE_object.h"
+#include "BKE_scene.h"
 #include "BKE_utildefines.h"
 
 #include "MEM_guardedalloc.h"
@@ -466,7 +467,7 @@ static void build_dag_object(DagForest *dag, DagNode *scenenode, Object *ob, int
 		dag_add_relation(dag,node2,node,DAG_RL_OB_OB);
 		addtoroot = 0;
 	}
-	if (ob->id.lib==NULL && ob->proxy) {
+	if (ob->proxy) {
 		node2 = dag_get_node(dag, ob->proxy);
 		dag_add_relation(dag, node, node2, DAG_RL_DATA_DATA|DAG_RL_OB_OB);
 		/* inverted relation, so addtoroot shouldn't be set to zero */
@@ -1792,15 +1793,16 @@ static void dag_object_time_update_flags(Object *ob)
 }
 
 /* flag all objects that need recalc, for changes in time for example */
-void DAG_scene_update_flags(Scene *sce, unsigned int lay)
+void DAG_scene_update_flags(Scene *scene, unsigned int lay)
 {
 	Base *base;
 	Object *ob;
 	Group *group;
 	GroupObject *go;
+	Scene *sce;
 	
 	/* set ob flags where animated systems are */
-	for(base= sce->base.first; base; base= base->next) {
+	for(SETLOOPER(scene, base)) {
 		ob= base->object;
 		
 		/* now if DagNode were part of base, the node->lay could be checked... */
@@ -1810,8 +1812,7 @@ void DAG_scene_update_flags(Scene *sce, unsigned int lay)
 		/* handled in next loop */
 		if(ob->dup_group) 
 			ob->dup_group->id.flag |= LIB_DOIT;
-		
-	}
+	}	
 	
 	/* we do groups each once */
 	for(group= G.main->group.first; group; group= group->id.next) {
@@ -1822,25 +1823,26 @@ void DAG_scene_update_flags(Scene *sce, unsigned int lay)
 		}
 	}
 	
-	DAG_scene_flush_update(sce, lay);
+	for(sce= scene; sce; sce= sce->set)
+		DAG_scene_flush_update(sce, lay);
 	
 	/* test: set time flag, to disable baked systems to update */
-	for(base= sce->base.first; base; base= base->next) {
+	for(SETLOOPER(scene, base)) {
 		ob= base->object;
 		if(ob->recalc)
 			ob->recalc |= OB_RECALC_TIME;
 	}
 	
 	/* hrmf... an exception to look at once, for invisible camera object we do it over */
-	if(sce->camera)
-		dag_object_time_update_flags(sce->camera);
+	if(scene->camera)
+		dag_object_time_update_flags(scene->camera);
 	
 	/* and store the info in groupobject */
 	for(group= G.main->group.first; group; group= group->id.next) {
 		if(group->id.flag & LIB_DOIT) {
 			for(go= group->gobject.first; go; go= go->next) {
 				go->recalc= go->ob->recalc;
-//				printf("ob %s recalc %d\n", go->ob->id.name, go->recalc);
+				// printf("ob %s recalc %d\n", go->ob->id.name, go->recalc);
 			}
 			group->id.flag &= ~LIB_DOIT;
 		}
diff --git a/source/blender/blenkernel/intern/ipo.c b/source/blender/blenkernel/intern/ipo.c
index 129b5037346..ad12893ba28 100644
--- a/source/blender/blenkernel/intern/ipo.c
+++ b/source/blender/blenkernel/intern/ipo.c
@@ -753,8 +753,8 @@ static float eval_driver(IpoDriver *driver, float ipotime)
 		Object *ob= driver->ob;
 
 		if(ob==NULL) return 0.0f;
-		if(ob->id.lib && ob->proxy)
-			ob= ob->proxy;
+		if(ob->proxy_from)
+			ob= ob->proxy_from;
 		
 		if(driver->blocktype==ID_OB) {
 			/* depsgraph failure; ob ipos are calculated in where_is_object, this might get called too late */
diff --git a/source/blender/blenkernel/intern/object.c b/source/blender/blenkernel/intern/object.c
index abe7cd4d38d..af2d562b331 100644
--- a/source/blender/blenkernel/intern/object.c
+++ b/source/blender/blenkernel/intern/object.c
@@ -273,6 +273,10 @@ void unlink_object(Object *ob)
 	while(obt) {
 		if(obt->proxy==ob)
 			obt->proxy= NULL;
+		if(obt->proxy_from==ob) {
+			obt->proxy_from= NULL;
+			obt->recalc |= OB_RECALC_OB;
+		}
 		if(obt->proxy_group==ob)
 			obt->proxy_group= NULL;
 		
@@ -992,7 +996,8 @@ void make_local_object(Object *ob)
 	    */
 	
 	if(ob->id.lib==NULL) return;
-	if(ob->proxy) return;
+	
+	ob->proxy= ob->proxy_from= NULL;
 	
 	if(ob->id.us==1) {
 		ob->id.lib= NULL;
@@ -1047,7 +1052,7 @@ void make_local_object(Object *ob)
 
 /* *************** PROXY **************** */
 
-/* proxy rule: lib_object->proxy == the one we borrow from, set temporally while object_update */
+/* proxy rule: lib_object->proxy_from == the one we borrow from, set temporally while object_update */
 /*             local_object->proxy == pointer to library object, saved in files and read */
 /*             local_object->proxy_group == pointer to group dupli-object, saved in files and read */
 
@@ -1499,7 +1504,7 @@ void where_is_object_time(Object *ob, float ctime)
 			pushdata(par, sizeof(Object));
 			pop= 1;
 			
-			if(par->id.lib && par->proxy);	// was a copied matrix, no where_is! bad...
+			if(par->proxy_from);	// was a copied matrix, no where_is! bad...
 			else where_is_object_time(par, ctime);
 		}
 		
@@ -1966,8 +1971,8 @@ void minmax_object(Object *ob, float *min, float *max)
 	}
 }
 
-/* proxy rule: lib_object->proxy == the one we borrow from, only set temporal and cleared here */
-/*             local_object->proxy == pointer to library object, saved in files and read */
+/* proxy rule: lib_object->proxy_from == the one we borrow from, only set temporal and cleared here */
+/*           local_object->proxy      == pointer to library object, saved in files and read */
 
 /* function below is polluted with proxy exceptions, cleanup will follow! */
 
@@ -1978,13 +1983,19 @@ void object_handle_update(Object *ob)
 	if(ob->recalc & OB_RECALC) {
 		
 		if(ob->recalc & OB_RECALC_OB) {
-			if(OB_COPY_PROXY(ob)) {
-				if(ob->proxy->proxy_group) {/* transform proxy into group space */
-					Mat4Invert(ob->proxy->proxy_group->imat, ob->proxy->proxy_group->obmat);
-					Mat4MulMat4(ob->obmat, ob->proxy->obmat, ob->proxy->proxy_group->imat);
+			
+			// printf("recalcob %s\n", ob->id.name+2);
+			
+			/* handle proxy copy for target */
+			if(ob->id.lib && ob->proxy_from) {
+				// printf("ob proxy copy, lib ob %s proxy %s\n", ob->id.name, ob->proxy_from->id.name);
+				if(ob->proxy_from->proxy_group) {/* transform proxy into group space */
+					Object *obg= ob->proxy_from->proxy_group;
+					Mat4Invert(obg->imat, obg->obmat);
+					Mat4MulMat4(ob->obmat, ob->proxy_from->obmat, obg->imat);
 				}
 				else
-					Mat4CpyMat4(ob->obmat, ob->proxy->obmat);
+					Mat4CpyMat4(ob->obmat, ob->proxy_from->obmat);
 			}
 			else
 				where_is_object(ob);
@@ -2012,8 +2023,10 @@ void object_handle_update(Object *ob)
 				if(ob->pose==NULL || (ob->pose->flag & POSE_RECALC))
 					armature_rebuild_pose(ob, ob->data);
 				
-				if(OB_COPY_PROXY(ob))
-					copy_pose_result(ob->pose, ob->proxy->pose);
+				if(ob->id.lib && ob->proxy_from) {
+					copy_pose_result(ob->pose, ob->proxy_from->pose);
+					// printf("pose proxy copy, lib ob %s proxy %s\n", ob->id.name, ob->proxy_from->id.name);
+				}
 				else {
 					do_all_pose_actions(ob);
 					where_is_pose(ob);
@@ -2022,9 +2035,10 @@ void object_handle_update(Object *ob)
 		}
 	
 		/* the no-group proxy case, we call update */
-		if(OB_DO_PROXY(ob)) {
+		if(ob->proxy && ob->proxy_group==NULL) {
 			/* set pointer in library proxy target, for copying, but restore it */
-			ob->proxy->proxy= ob;
+			ob->proxy->proxy_from= ob;
+			// printf("call update, lib ob %s proxy %s\n", ob->proxy->id.name, ob->id.name);
 			object_handle_update(ob->proxy);
 		}
 	
@@ -2032,9 +2046,9 @@ void object_handle_update(Object *ob)
 	}
 
 	/* the case when this is a group proxy, object_update is called in group.c */
-	if(OB_IS_PROXY(ob)) {
-		ob->proxy->proxy= ob;
-		//printf("set proxy pointer for later group stuff %s\n", ob->id.name);
+	if(ob->proxy) {
+		ob->proxy->proxy_from= ob;
+		// printf("set proxy pointer for later group stuff %s\n", ob->id.name);
 	}
 }
 
diff --git a/source/blender/blenkernel/intern/scene.c b/source/blender/blenkernel/intern/scene.c
index 6ea01013584..b5e41ec8514 100644
--- a/source/blender/blenkernel/intern/scene.c
+++ b/source/blender/blenkernel/intern/scene.c
@@ -277,29 +277,28 @@ void set_scene_bg(Scene *sce)
 	scene_check_setscene(G.scene);
 	
 	/* deselect objects (for dataselect) */
-	ob= G.main->object.first;
-	while(ob) {
+	for(ob= G.main->object.first; ob; ob= ob->id.next)
 		ob->flag &= ~(SELECT|OB_FROMGROUP);
-		ob= ob->id.next;
-	}
 
 	/* group flags again */
-	group= G.main->group.first;
-	while(group) {
+	for(group= G.main->group.first; group; group= group->id.next) {
 		go= group->gobject.first;
 		while(go) {
 			if(go->ob) go->ob->flag |= OB_FROMGROUP;
 			go= go->next;
 		}
-		group= group->id.next;
 	}
 
 	/* sort baselist */
 	DAG_scene_sort(sce);
+	
+	/* ensure dags are built for sets */
+	for(sce= sce->set; sce; sce= sce->set)
+		if(sce->theDag==NULL)
+			DAG_scene_sort(sce);
 
 	/* copy layers and flags from bases to objects */
-	base= G.scene->base.first;
-	while(base) {
+	for(base= G.scene->base.first; base; base= base->next) {
 		ob= base->object;
 		ob->lay= base->lay;
 		
@@ -311,7 +310,6 @@ void set_scene_bg(Scene *sce)
 		ob->flag= base->flag;
 		
 		ob->ctime= -1234567.0;	/* force ipo to be calculated later */
-		base= base->next;
 	}
 	/* no full animation update, this to enable render code to work (render code calls own animation updates) */
 	
diff --git a/source/blender/blenloader/intern/readfile.c b/source/blender/blenloader/intern/readfile.c
index d33fa6334b4..04e57518d21 100644
--- a/source/blender/blenloader/intern/readfile.c
+++ b/source/blender/blenloader/intern/readfile.c
@@ -486,7 +486,7 @@ static Main *blo_find_main(ListBase *mainlist, const char *name, const char *rel
 		char *libname= (m->curlib)?m->curlib->filename:m->name;
 		
 		if (BLI_streq(name1, libname)) {
-			printf("blo_find_main: found library %s\n", libname);
+			if(G.f & G_DEBUG) printf("blo_find_main: found library %s\n", libname);
 			return m;
 		}
 	}
@@ -500,7 +500,7 @@ static Main *blo_find_main(ListBase *mainlist, const char *name, const char *rel
 	
 	m->curlib= lib;
 	
-	printf("blo_find_main: added new lib %s\n", name);
+	if(G.f & G_DEBUG) printf("blo_find_main: added new lib %s\n", name);
 	return m;
 }
 
@@ -2588,20 +2588,23 @@ static void lib_link_object(FileData *fd, Main *main)
 			ob->ipo= newlibadr_us(fd, ob->id.lib, ob->ipo);
 			ob->action = newlibadr_us(fd, ob->id.lib, ob->action);
 			ob->dup_group= newlibadr_us(fd, ob->id.lib, ob->dup_group);
-			if(ob->id.lib) {
-				/* no proxy in library data, is default local data */
-				ob->proxy= NULL; ob->proxy_group= NULL;
-			}
-			else {
-				ob->proxy= newlibadr_us(fd, ob->id.lib, ob->proxy);
-				if(ob->proxy) {
+			
+			ob->proxy= newlibadr_us(fd, ob->id.lib, ob->proxy);
+			if(ob->proxy) {
+				/* paranoia check, actually a proxy_from pointer should never be written... */
+				if(ob->proxy->id.lib==NULL) {
+					ob->proxy->proxy_from= NULL;
+					ob->proxy= NULL;
+				}
+				else {
 					/* this triggers object_update to always use a copy */
-					ob->proxy->proxy= ob;
+					ob->proxy->proxy_from= ob;
 					/* force proxy updates after load/undo, a bit weak */
 					ob->recalc= ob->proxy->recalc= OB_RECALC;
 				}
-				ob->proxy_group= newlibadr(fd, ob->id.lib, ob->proxy_group);
-			}			
+			}
+			ob->proxy_group= newlibadr(fd, ob->id.lib, ob->proxy_group);
+
 			poin= ob->data;
 			ob->data= newlibadr_us(fd, ob->id.lib, ob->data);
 			   
@@ -6335,13 +6338,13 @@ static void expand_doit(FileData *fd, Main *mainvar, void *old)
 
 				if(id==0) {
 					read_libblock(fd, mainvar, bhead, LIB_READ+LIB_INDIRECT, NULL);
-					printf("expand_doit: other lib %s\n", lib->name);
+					if(G.f & G_DEBUG) printf("expand_doit: other lib %s\n", lib->name);
 				}
 				else {
 					//oldnewmap_insert(fd->libmap, bhead->old, id, 1);
 					
 					change_idid_adr_fd(fd, bhead->old, id);
-					printf("expand_doit: already linked: %s lib: %s\n", id->name, lib->name);
+					if(G.f & G_DEBUG) printf("expand_doit: already linked: %s lib: %s\n", id->name, lib->name);
 				}
 			}
 		}
@@ -6727,6 +6730,11 @@ static void expand_object(FileData *fd, Main *mainvar, Object *ob)
 
 	if(ob->dup_group)
 		expand_doit(fd, mainvar, ob->dup_group);
+	
+	if(ob->proxy)
+		expand_doit(fd, mainvar, ob->proxy);
+	if(ob->proxy_group)
+		expand_doit(fd, mainvar, ob->proxy_group);
 
 	sens= ob->sensors.first;
 	while(sens) {
@@ -7246,7 +7254,7 @@ static void read_libraries(FileData *basefd, ListBase *mainlist)
 
 				if(fd==NULL) {
 					BlendReadError err;
-					printf("read_libraries: lib %s\n", mainptr->curlib->name);
+					printf("read library: lib %s\n", mainptr->curlib->name);
 					fd= blo_openblenderfile(mainptr->curlib->filename, &err);
 					if (fd) {
 						if (fd->libmap)
diff --git a/source/blender/makesdna/DNA_action_types.h b/source/blender/makesdna/DNA_action_types.h
index 30d1c5c7ab6..2c8711d10ba 100644
--- a/source/blender/makesdna/DNA_action_types.h
+++ b/source/blender/makesdna/DNA_action_types.h
@@ -82,12 +82,10 @@ typedef struct bPoseChannel {
 
 typedef struct bPose{
 	ListBase			chanbase;
-	int flag;
+	short flag, proxy_layer;	/* proxy layer: copy from armature, gets synced */
 	float ctime;				/* local action time of this pose */
 	float stride_offset[3];		/* applied to object */
 	float cyclic_offset[3];		/* result of match and cycles, applied in where_is_pose() */
-	short proxy_layer, pad1;
-	int pad2;
 } bPose;
 
 typedef struct bActionChannel {
diff --git a/source/blender/makesdna/DNA_object_types.h b/source/blender/makesdna/DNA_object_types.h
index e58e6d7aa79..3ecfafeddaf 100644
--- a/source/blender/makesdna/DNA_object_types.h
+++ b/source/blender/makesdna/DNA_object_types.h
@@ -90,7 +90,10 @@ typedef struct Object {
 	int par1, par2, par3;	/* can be vertexnrs */
 	char parsubstr[32];	/* String describing subobject info */
 	void *pardata;
-	struct Object *parent, *track, *proxy, *proxy_group;
+	struct Object *parent, *track;
+	/* if ob->proxy (or proxy_group), this object is proxy for object ob->proxy */
+	/* proxy_from is set in target back to the proxy. */
+	struct Object *proxy, *proxy_group, *proxy_from;
 	struct Ipo *ipo;
 	struct Path *path;
 	struct BoundBox *bb;
diff --git a/source/blender/src/drawview.c b/source/blender/src/drawview.c
index 397d383edda..7e3a86f2dcb 100644
--- a/source/blender/src/drawview.c
+++ b/source/blender/src/drawview.c
@@ -2768,7 +2768,7 @@ void drawview3dspace(ScrArea *sa, void *spacedata)
 	
 	/* update all objects, ipos, matrices, displists, etc. Flags set by depgraph or manual, 
 	   no layer check here, gets correct flushed */
-	for(base= G.scene->base.first; base; base= base->next) {
+	for(SETLOOPER(G.scene, base)) {
 		object_handle_update(base->object);   // bke_object.h
 	}
 	
@@ -2857,8 +2857,6 @@ void drawview3dspace(ScrArea *sa, void *spacedata)
 		for(SETLOOPER(G.scene->set, base)) {
 			
 			if(v3d->lay & base->lay) {
-
-				object_handle_update(base->object);
 				
 				BIF_ThemeColorBlend(TH_WIRE, TH_BACK, 0.6f);
 				draw_object(base, DRAW_CONSTCOLOR);
diff --git a/source/blender/src/editconstraint.c b/source/blender/src/editconstraint.c
index 178acf51b1d..2ee40396061 100644
--- a/source/blender/src/editconstraint.c
+++ b/source/blender/src/editconstraint.c
@@ -620,7 +620,7 @@ void add_constraint(int only_IK)
 		if(pchanact==NULL) return;
 	
 		/* check protection */
-		if(OB_IS_PROXY(ob) && (pchanact->bone->layer & arm->layer_protected)) {
+		if(ob->proxy && (pchanact->bone->layer & arm->layer_protected)) {
 			error("Bone is Proxy protected");
 			return;
 		}
diff --git a/source/blender/src/poseobject.c b/source/blender/src/poseobject.c
index 501c3977de1..aa82544217c 100644
--- a/source/blender/src/poseobject.c
+++ b/source/blender/src/poseobject.c
@@ -177,7 +177,7 @@ static int pose_has_protected_selected(Object *ob, int only_selected)
 {
 	
 	/* check protection */
-	if(OB_IS_PROXY(ob)) {
+	if(ob->proxy) {
 		bPoseChannel *pchan;
 		bArmature *arm= ob->data;