My BearHtml.ini does not have the 'Proxy' entry. This means that, as you say, it must be a bug in WinInet.dll. However, it is easy to see that the registry key is being examined when Pegasus runs. I used "Process Monitor" from sysinternals.com. There's no question in my mind that a) that registry key is being examined and b) deleting the registry key affects the behavior of BearHtml.

Ed
 

Here's the scenario: first configure a proxy server for Internet Explorer (I used 127.0.0.1, port 8080). Then unconfigure this proxy server but leave the IP address and port in the dialog (they will be grayed out). Make sure there is no proxy server at that address and port.

Now open Pegasus and get a new HTML email that has graphics hosted somewhere else (lazy HTML). The email must be new, so the graphics are not in the cache. BearHTML will not show you the graphics when you ask for them.

The bug seems to be that either BearHTML, or perhaps the Pegasus code it uses, looks at the registry key:

HKCU\Software\Microsoft\Windows\CurrentVersion\Internet Settings\Proxy Server, and finds the IP address and port, but it ignores the other key:

HKCU\Software\Microsoft\Windows\CurrentVersion\Internet Settings\ProxyEnable which is set to 0, meaning "Don't use that proxy".

The workaround was to not just disable the proxy server in IE, but to first erase the useless IP address and Port in the dialog. 

Bearhtml has an entry in Bearhtml.ini that has to be used to enable proxy handling for remote graphics. Eg: proxyserver=http://127.0.0.1:8080

Without that, all proxy handling is done by Microsoft WinInet.dll the Internet interface directly.  As you don't mention this Bearhtml.ini line, it is a Microsoft bug(?)  BTW the registry entry you show us is only for Internet Exporer. That is why I had to introduce Proxy handling in Bearhtml, as Opera, Firefox etc don't use that registry entry.

Martin