ARP/MAC Tables Not Updating on Core Switches After F5 LTM Failover (GARP Issue?)

What we experienced was a bug in nx-os. The dropped packets also could not be seen in any counters...

MAC masquerading should not cause MAC flapping in normal operation since the standby unit will not send any packets with the "floating" MAC as source. The MAC masquerading address is only used for floating objects and those are only active on the active system for the according traffic-group. You are right though that you can see traffic from the standby machines "original" MAC address in normal operation (which is indeed also used for the floating objects when in active mode). This is most probably health check traffic, which is originating from a non-floating self IP. So, this traffic will not change when enabling MAC masquerading. Both machines will continue to send health checks from their non-floating self IPs, and those packets will sustain the original (non-masquerading) MAC address.

BTW, for provoking additional GARPs for all floating objects, you could also do a "tmsh load sys config", which will achieve the same without having to disable / re-enable all objects. But don't forget to make sure the config is saved before ;-)