Proxy Auto-Detect, how does it affect YM???

Recently i had an issue with Yahoo Messenger, the login was failing all the time and troubleshoot give the following error.

Checking virtual IP servers...
[VIP Raw] Resolving host name us1.proxy.mycomp.com... [PASSED]
[VIP Raw] Connecting to Virtual IP server 75.X.Y.Z... [FAILED]
 ***  'COMPONENT_TYPE_WININET' value: '12017' ***
[VIP Raw] Connecting to Virtual IP server 75.X.Y.Z...
[VIP Raw] Connecting to Virtual IP server 75.X.Y.Z... [FAILED]
 ***  'COMPONENT_TYPE_WININET' value: '12017' ***
[VIP Raw] Connecting to Virtual IP server 75.X.Y.Z... [FAILED]
 ***  'COMPONENT_TYPE_WININET' value: '12017' ***
[VIP Raw] FAILED
 ***  'COMPONENT_TYPE_YCP' YCPError: 'YMSG.ColoSelectionTimeout' ***

IE8 -> Tools -> Internet Options -> Connections -> 
LAN Settings -> Automatically detect settings (uncheck it)

# nslookup wpad
   Name: wpad.mycomp.com
   Address: 79.X1.Y1.Z1
# http://wpad/wpad.dat
  --> return "PROXY us1.proxy.mycomp.com:8000;";
# The proxy server redirects all HTTP req to auth page

# The same was happening to YM and hence the issue.
# It seems IE, Chrome and YM are sharing same configuration.
# what the ..ck???

Reference:
http://blog.freyguy.com/archives/2006/03/01/proxy-auto-detect-ie-and-firefox
http://www.grape-info.com/doc/win2000srv/internet-gw/wpad/index.html