As far as my knowldge is concerned,both product proposal 
and item proposal are one and the same.the standard 
document types are MS or PV.but i am not aware of the 
dynamic product proposal.
To say in the short form the item proposals are nothing but 
the order materials with quantities which can be copied 
into the sales order.To configure, the trans code is-
VOV8.To create VA51.
Once you create u can assign the item proposal number to 
the customer master at VD02 in "item proposal".
When ever the we create a sales order for the particular 
customer system proposes the item proposal which contains 
the line items with quantities to choose from.
An end user can choose the line items with or with out 
quantity.
this is the great tool useful for the business.

pls provide any other info.