isues with GPO for IE Proxy Settings......

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Good morning!

One of my colleagues set up a GPO at a client's site some two years ago and everything was working fine and dandy until one of the servers (let's just call it "server1") was replaced (let's just call that replacement "server2"). This was some four months ago and now this is an issue. I am trying to resolve this but running into a wall. Here are some details:

1) Single-label domain (I know, I know....I did not set this up...we inherited this)
2) Computers are located in the default "Computers" Container
3) Users are located in the default "Users" Container
4) GPO is linked at the Domain Level - making use of Security Filtering (call that Security Group "GPO_ControlInternet")...so, in short, only 'Staff' members are affected (Management has free reign to waste as much company time at espn.go.com and hsn.com as they want!....that came directly from the Administrator!!!!)
5) GPO contents are in the user side of things........User Configuration | Windows Settings | IE Maintenance | Connection/Proxy Settings


I entered 0.0.0.0 as the Proxy Server and there is no proxy server anymore (it used to be SERVER1, which ran Proxy Server 2.0.....oh, the good ole days).
I checked the checkbox to use the same address for all protocols
The "Do not use proxy server for addresses beginning with:" area is full of web sites in the form of "google.com" and not "http://www.google.com";. Each web site is separated by a ";".


6) Most client machines are running Windows XP SP3 with Internet Explorer 8. This worked under IE6...did not under IE7 and does not under IE8.
7) On a workstation I did increase the userenv logging (via the registry) and did find out that the user did not have access to the install.ins file. I am going from memory so I believe that this is the name of the file...anyway, I opened it up and it does hold all of the 'allowed' web sites. I do have access to it when logged on as a Domain Admin (although the permissions on that file do indicate that "GPO_ControlInternet" has read access).
8) I have seen something about in IE7 where the proxy settings were computer-side and that you needed to turn that off for this to work. Is this the same story with IE8?
9) Assuming #8 to be correct I guess that I would have to set up loopback processing.....correct?

.



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