After the December 2010 Internet Explorer 8 updates I was seeing some strange behavior for a couple sites including  Users could get to the first page, but if they clicked on any of the links they would get a page cannot be displayed error.  It appeared like the user could browse to the first page via the proxy, but all subsequent pages were being sent direct. 

It turns out the IE8 updates changed the behavior of the WPAD script that we were using and we had to edit the following line:
proxy = "PROXY; DIRECT";

We had to change it to look like:
proxy = "PROXY";

After making this change the sites in question began to work.