I have the following middlegen hibernate task :

<hibernate
destination="src"
package="com.rhi.bobnet.hibernate.beans" javaTypeMapper="middlegen.plugins.hibernate.HibernateJavaTypeMapper"
standardGeneratorScheme="sequence"
genXDocletTags="false"
equalsHashcode="true"
genLazyNotProxy="false"
/>

Regardless of the setting for genLazyNotProxy (true or false) ,
the value for lazy in the resulting hbm.xml files is always true.

<set
name="lobOffices"
lazy="true"
inverse="true"
cascade="none"
>
<key>
<column name="BRANCH_ID" />
</key>
<one-to-many
class="com.rhi.bobnet.hibernate.beans.LobOffice"
/>
</set>

Does genLazyNotProxy work ? Does it do something I'm missing?
Is there a way to set it to false?

The setting you are using determines if the newer lazy tag is used or the older proxy tag is used. Either is used when the Proxy option is selected in the GUI for the target table.