If you choose to enable L7 Transparency within a virtual service, the packets travelling from the LoadMaster to the server will have their IP source listed as that of the client IP. This will enable your servers to log the IP address of the individual requesting clients.
Without transparency, the server logs would only see the LoadMaster making all of the requests. The reason traffic seems to stop flowing with L7 transparency, is due to the fact that the servers then try to respond directly to the client. As the client did not pose its request to the server, it will drop any incoming packets.
The remedy to this problem is to change your server's default gateway to point to LoadMaster's interface which is on the same subnet as the server pool. If you are using a high availability pair, you should choose the shared IP address on the same subnet as the server pool.