It looks like you misunderstand how double strike works, thinking the second hit happens after normal damage. The best way to think of double strike is a creature that does both first strike damage (damage at the same time as creatures with first strike) and normal damage (damage at the same time as creatures that don't have first strike) There are a few parts of the Comprehensive Rules that come in to play here:
510.1 First, the active player announces how each attacking creature assigns its combat damage, then the defending player announces how each blocking creature assigns its combat damage. This turn-based action doesn’t use the stack. A player assigns a creature’s combat damage according to the following rules:
510.2 Second, all combat damage that’s been assigned is dealt simultaneously. This turn-based action doesn’t use the stack. No player has the chance to cast spells or activate abilities between the time combat damage is assigned and the time it’s dealt.
510.4 If at least one attacking or blocking creature has first strike (see rule 702.7) or double strike (see rule 702.4) as the combat damage step begins, the only creatures that assign combat damage in that step are those with first strike or double strike. After that step, instead of proceeding to the end of combat step, the phase gets a second combat damage step. The only creatures that assign combat damage in that step are the remaining attackers and blockers that had neither first strike nor double strike as the first combat damage step began, as well as the remaining attackers and blockers that currently have double strike. After that step, the phase proceeds to the end of combat step.
704.5g If a creature has toughness greater than 0, it has damage marked on it, and the total damage marked on it is greater than or equal to its toughness, that creature has been dealt lethal damage and is destroyed. Regeneration can replace this event.
So this is what happens.
- There is a creature with first strike or double strike in combat, so the game goes into the first of two damage steps. (510.4)
- Creatures with first strike or double strike assign their full damage to the blocking/blocked creature(s) or defending player/planeswalker. In this case just the 1/1 double strike blocker which assigns 1 damage to the 3/2 attacker.
- The assigned damage is all done at the same time. In this case that is the 1/1 creature doing 1 damage to the 3/2 it is blocking.
- No creatures have lethal damage on them, so nothing dies at this point. (players do have the ability to cast spells or use abilities, assuming none do)
- The game goes to the second combat damage step, for creatures with double strike or without either first strike or double strike to do damage
- Creatures without first strike or with double strike assign their full damage. In this case that is the 3/2 assigning 3 damage to the 1/1 blocking it and the 1/1 double striker assigning 1 damage to the 3/2 it is blocking.
- This damage is done all at once (510.2), with both creatures doing damage to each other at the same time. This leaves the 3/2 attacker with 2 damage marked on it and the 1/1 blocker with 3 damage marked on it. Nothing happens immediately.
- The game checks state based actions and both creatures meet the conditions for the SBA in rule 704.5g. The SBAs all happen all at once, and both creatures are sent to their owner's graveyards.