Proxy using socket, doubts on multithreading and connection closing
First off, you need to do some error catching with the socket functions. All of them can possibly fail, it's better to be safe and do some error catching.

Here is what I mean:

try:
    server = socket.socket(socket.AF_INET, socket.SOCK_STREAM)
    server.bind(('', serv_port))
    server.listen(5)
except socket.msg as error:
    print("Recieved error #%d: %s\n" % (error[0], error[1]))
    sys.exit(-1)


And, with socket.accept too:

try:
    conn, addr = server.accept()
except socket.error as error:
    print("Recieved error #%d: %s\n" % (error[0], error[1]))
    sys.exit(-1)

When there is an error with a socket call, a tuple is returned containing the error code (returned from the socket syscall) and an error message to go along with it.

I added a sys.exit to the code that will close the program with exit code -1, which usually means to external that there was an error while running the program. To use this, you will have to import sys.



In this part of a line

threading.Thread(target=cthread, args=(conn,))


I don't think there should be a comma after conn in the tuple for args.



According to the python docs on socket.settimeout,


  The value argument can be a nonnegative float expressing seconds, or
  None.


You aren't passing in a float value when you call settimeout.

Also, I believe that you should allow more time before a timeout. Reading in 4096 bytes of data might take more than 1 second.

Maybe 3 seconds would work.



Indentation isn't as strict in python 2 as it is in python 3, but you still want it to be perfect.

In your while loop of cthread, your indentation is messed up:

 def cthread(conn): # extra space
    #set timeout
    conn.settimeout(1)
    #receive data until null data is received or socket times out
    req = b''
    while True:
        try:
              req_pack = conn.recv(4096) # extra 2 spaces (1/2 tab)
            if not req_pack:
                break
            else:
                req += req_pack                
        except socket.timeout:
                      break # extra 10 spaces (2 1/2 tabs)

   print req #print request to stdout # missing space

   #send a sample response
   conn.send(b'HTTP/1.1 200 OK\n\n&lt;h1&gt;Hello&lt;/h1') # missing space

   conn.close() # missing space


Either indent lines with 1 tab or 4 spaces.



Now for your questions.


I'm a little confused by this question. Right now in your code, when you recieve a connection, you do handle the recieving and the sending in a separate thread. This is fine, and is a good idea.
After you close a connection, there is no connection to slow down. And yes; this is fine. Since your server isn't going to do anything more after it has sent it's response, then there is no point in keeping the connection. It'll just bog your server down in the long-run.