Just had dinner with one of my buddies in TFS and they pointed out a great post by Ed that didn’t make to the team blog:

Enjoy!

 

If you are installing a TFS Proxy server on a machine that is configured to
automatically receive the proxy settings from your network (this is different
than DHCP) you may have connectivity issues when running the TFS Proxy Service
as a machine account, such as NETWORK Service. 
For servers it is generally recommended that they use pre-configured IP
and network Proxy settings (if needed).

You can verify this setting on your machine by opening up Internet Explorer / Tools
/ Internet Options / Connections / LAN Settings.

The problem is that these settings are cached at a user level the first time
Internet Explorer (or default browser) is run. 
If you are using a machine account such as NETWORK Service, it will
never run the browser, and get these proxy settings.

In this situation you will either need to:


  1. Manually configure the proxy settings for this server (preferred)

  2. Run the TFS Proxy Service as a user account, login via this account,
    and launch the web browser so the proxy setting are cached.