Bricked atmega32 with fuse bits
AVRs, as well as just about anything else that uses parallel resonant oscillators (or put simply, it has 2 clock/XTAL pins) can always be driven by a direct external clock which bypasses whatever misconfiguration was accidentally burned into the fuses.  The 'real' clock pin is, in the case of the ATmega32, the XTAL1 pin.  The fuse bits change the behavior of the XTAL2 pin so it will generate its own clock if the correct parallel resonant circuit is connected between XTAL1 and XTAL2.  All oscillator circuits have the output as part of a closed loop, so regardless of fuse bit settings, XTAL1 is where the output of an external oscillator feeds into, and the AVR doesn't know or care where its clock is actually coming from.  The fuse bits just alter stuff between XTAL1 and XTAL2, but XTAL1 is the actual input for the clock.

All you've done is temporarily broken the chip's ability to generate its own clock source, so all you need to do is have something else drive its clock (XTAL1) pin.  Er, you don't need to simulate an RC oscillator, and you most certainly could not simulate one in any real meaning of the word using an Arduino.  Regardless, there is no need or point.  Just pour a nice 1MHz square wave with 50% duty into XTAL1 and you'll be good to go.

You could most easily do this with that Arduino, depending on how fast it is.  If it is running at 8MHz, this code should produce a 1MHz clock at digital pin 11.

void main()
{
    DDRB = 0xFF;
    cli();  // disable interrupts
    while(1)
    {
        PORTB |= 0x8;
        PORTB |= 0x8;
        PORTB &amp;= ~0x8;
    }
}


If you have an arduino running at 16MHz, we need to evenly distribute 8 additional instructions, so try:

void main()
{
    DDRB = 0xFF;
    cli();  // disable interrupts
    while(1)
    {
        PORTB |= 0x8; //sbi 2 cycles 
        PORTB |= 0x8; //sbi 2 cycles
        nop(); // 1 cycle each
        nop();
        nop();
        nop();  // 8 cycles spent with D11 high
        PORTB &amp;= ~0x8; // cbi 2 cycles
        nop(); // 1 cycle each
        nop();
        nop();
        nop();
    }   // rjmp 2 cycles - D11 spent 8 cycles low. 
}   


Those will get you that nice 50% duty 1MHz square wave your ATmega32 craves.