You can easily set up your proxy settings for Windows Update and other background processes by using the commandline utility netsh.

For Vista, 7 and up

Show the current settings:

netsh winhttp show proxy

Set up a basic proxy server:

netsh winhttp set proxy ip-or-host:port

Set up a proxy with a bypass list: "ip-or-domain" will not use the proxy:

netsh winhttp set proxy myproxy:80 ";ip-or-domain"

Set up individual proxy servers for each protocol accept for those in the bypass list:

netsh winhttp set proxy proxy -server= "http=ip-or-host:80 ;https=ip-or-host:88" bypass-list= "*.contoso.com"

To import the settings from Internet Explorer:

netsh winhttp import proxy source=ie

To clear and reset the proxy settings:

netsh winhttp reset proxy

Note that many of these settings can be overridden through GPO.

For XP and 2003

XP uses proxycfg for the configuration of proxy settings.

Show the current proxy settings:

proxycfg

Set up basic proxy server settings:

proxycfg -p ip-or-host:port

Set up a proxy server with a bypass list:

proxycfg -p ip-or-host:port "*.contoso.com"

Import proxy settings from Internet Explorer (current user):

proxycfg -u

Reset and clear the proxy settings; this sets up direct access:

proxycfg -d