Here is an end-to-end demonstration of how to use a proxy table to copy data from one database to another. In this example, ddd2 represents your read-only database, and ddd1 is the database where you can actually mess, er, work with the data.

"%SQLANY10%\win32\dbinit.exe" ddd1.db
"%SQLANY10%\win32\dbinit.exe" ddd2.db

"%SQLANY10%\win32\dbspawn.exe" -f "%SQLANY10%\win32\dbeng10.exe" ddd1.db 
"%SQLANY10%\win32\dbspawn.exe" -f "%SQLANY10%\win32\dbeng10.exe" ddd2.db

"%SQLANY10%\win32\dbisql.exe" -c "ENG=ddd1;DBN=ddd1;UID=dba;PWD=sql;CON=ddd1"
"%SQLANY10%\win32\dbisql.exe" -c "ENG=ddd2;DBN=ddd2;UID=dba;PWD=sql;CON=ddd2"

---------------------------------------------------------------------
-- On ddd2

CREATE TABLE t ( 
   pkey INTEGER NOT NULL PRIMARY KEY,
   data INTEGER NOT NULL );

INSERT t VALUES ( 1, 2 );
INSERT t VALUES ( 2, 2 );
COMMIT;

SELECT *
  FROM t
 ORDER BY t.pkey;

/*

pkey,data
1,2
2,2

*/

---------------------------------------------------------------------
-- On ddd1

CREATE TABLE t ( 
   pkey INTEGER NOT NULL PRIMARY KEY,
   data INTEGER NOT NULL );

CREATE SERVER ddd2_server CLASS 'SAODBC' 
   USING 'DRIVER=SQL Anywhere 10;ENG=ddd2;DBN=ddd2';

/* or...

CREATE SERVER ddd2_server CLASS 'SAODBC' 
   USING 'DSN=ddd2';

*/

CREATE EXTERNLOGIN DBA -- optional for SQL Anywhere
   TO ddd2_server 
   REMOTE LOGIN "DBA" IDENTIFIED BY 'sql';

CREATE EXISTING TABLE proxy_t 
   AT 'ddd2_server...t';

-- Note: ON EXISTING UPDATE does not work (yet?)...

INSERT t SELECT * FROM proxy_t;
COMMIT;

SELECT *
  FROM t
 ORDER BY t.pkey;

/*

pkey,data
1,2
2,2

*/

Can you explain exactly the problem(s) you are encountering?

Perhaps you misunderstand the purpose of the CREATE EXISTING TABLE statement. It is defining a proxy, or reference, to the remote server table which does not mean it is extracting the table to the database against which the statement was run. An operation that affects the proxy table i.e., an update or delete will fail as the remote server is read-only since the statement is passed to the remote server to be processed.