Marty,
I ran in to a similar issue. I wanted to deploy the TS
specific settings to users only when they were on the
terminal server, however by using the AD GPO the settings
I was enforcing was user level so all users received the
GPO changes all the time.
To work around this, open the MMC and load the Local
Computer Group Policy snap-in. Navigate to User Config -
Windows Settings - Internet Explorer Maintenance -
Connection - Connection Settings. This is where you can
program in the proxy info.
Jim