It seems that the proxy settings are still not working properly in the new 12.0 Beta 3/3.1/3.2 releases. In the current release, it's been discovered that the /CONNECTION= is being set to PROXY instead of Proxy, so that's going to be fixed in Beta 3.3/4. But it's still not working, so I'm setting up this new thread to keep track of things. I've moved the relevant comments over here as well.
I'm working on a tester so we can try to determine what is and isn't working in inetc and will post it shortly. We'll get this nailed down as I'd really like to have proxies working in 12.0 final.