I'm not understanding your purpose for a proxy at all.
In Win2k, on the machine that you want to HOST the connection"
Start, Programs, Accessories, Communications, Network and Dial-Up Connections.
Let's say you have your connection called "AOL" (lol). Right click that connection, and choose properties. Go to "sharing" tab. Check the box to enable Internet Connection Sharing (ICS). You can also set the box for "on-demand dialing". That way if your other PC needs to connect to the internet, it will force the host computer to dial. Reboot the host.
I'm assuming both PC's are set to automatically retrieve an IP addy. If this is the case, reboot the other machine (non-host), and when it comes back up open the ICW (Internet Connection Wizard). Set it to connect through a LAN...no proxy server. Reboot this machine, and you SHOULD be good to go.
It's been a while since I've done this....try it and LMK