Ok as I started thinking later ....what for do I need proxy_set_header if my intention is to not proxy to Apache any request fall onto this catch all default_server ?

To see my config let's say it is as follow (not all parameters to let it be clearer):

====================== /etc/nginx/sites-enabled/mydomain
server {

listen 80;
server_name mydomain.com www.mydomain.com sub1.mydomain.com sub2.mydomain.com sub3.mydomain.com
error_page 502 503 504 400 /50x.html;
error_page 404 /404.php;

large_client_header_buffers 4 4k;

location = /50x.html {
root /var/www/mydomain/static/;
}
location ~* \.(jpg|jpeg|gif|png|css|bmp|ico|txt|html|swf)$ {
root /var/www/mydomain/
expires 1y;
}
location / {
proxy_pass http://127.0.0.1:60080/;
proxy_redirect off;
........
}
}

So my goal is to define a new vhost so that all requests reaching my nginx which don't fit any of my server names (all subdomains) are responded as one of 2 :: 404 returned or forwarding to another external URL (...whatever it fits better for SEO)

====================== /etc/nginx/sites-enabled/mydomain
server {
listen 80 default_server;
server_name _;
error_log /var/log/nginx/000default-error.log error;
location / {
proxy_set_header Host $host;
#return 404;
rewrite .* http://doesnotexist.com permanent;
}
}


I must say I tested (sure badly i did ) the proxy_set_header (not sure what for in my case) and still the same behaviour .....all my clients away :(