Problem: You have just turned on proxy support for Mac OS X. However, even though your proxy settings are correct, Safari and Chrome cannot connect to any web site. In addition, no proxy settings work, Auto Proxy Discovery, Automatic Proxy Configuration, and Web Proxy (HTTP). The settings are correct, but the browser cannot connect.
When this happened to me, Firefox and SeaMonkey worked just fine. Bizarre and frustrating.
Solution: Reboot you system. Yep, that's it.
In my particular case, as soon as I rebooted with Auto Proxy Discovery checked, everything on my system began to work fine. I hope this post helps save the time of other poor soul who runs into this. lol. No idea why the reboot is required.