Hello, how are you today? Good?
The unit is trying to emulate the sound you would get by using different types of mics of higher end caliber than the built in mics, which in itself is a contradiction. However, life is full of contradictions, and since mirroring life's dilemmas in our material acquisitions is an unconsciously inevitable act, thus this has been placed in the Edirol R1.
"Proximity effect" refers to the low frequency boost created by the sonic characteristics of a mic when the subject moves close to the mic. In English, you would hear increased bass if there was an option to turn Proximity "on" in the unit, assuming the effect was implemented correctly. Since proximity effect is, as a very general rule of thumb, undesirable in pro audio, the unit says "Proximity OFF" in those settings. Taking not of Edirol's sometimes wacky tech support, this I suspect is due to unrefined menu design. It is in a way giving you more information than you need as a semi-pro/amateur user.
The other indications, like "Large/small, dynamic/condenser.." refer to the size of the diaphragm, the element that picks up sonic vibrations, in a mic and the type of pickup element used. Each variable produces a characteristically different sound. As a non-pro end user I wouldn't be too concerned and just choose the sound that you like. Unless you have time to learn about the finer details of microphone design and psychoacoustics.
Audio Engineer Supreme, of the Fourth Galacticon