Getting Windows 7 to talk to a squid proxy server which uses ntml authentication via samba can be a little tricky.
Control Panel -> System and Security -> Administrative Tools -> Local Security Policy -> Local Policy -> Security Options
Find “Network security: LAN Manager authentication level ” and set it to: Send LM & NTLM responses
Find “Minimum session security for NTLM SSP” and set it to: Disable Require 128-bit encryption
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