"Disable changing proxy settings" not disabling via GPO

[zenful6219]

We have one OU with a linked GPO for users. This GPO is used for various policy/preference settings, but I am having problems with one setting in the GPO that has to do with the "Disable changing proxy settings" setting in User Configuration\Administrative Templates\Windows Components\Internet Explorer. We no longer want the setting enabled, so I changed it to Disabled, but after several reboots, background refreshes, and forced updates, the proxy settings dialog on the Proxy Server portion of the LAN settings tab in IE7 or IE8 remains grayed out.

I've tried creating and linking another GPO that only affects this one setting and I've changed the link order for the new GPO to #1, but that has no effect. The reason this is such a problem is that some machines have an old proxy server defined and, since it doesn't exist and we don't need to define the proxy server anymore in IE, users can't uncheck the proxy setting. I'm at a loss as to what to do next to make it so the users can uncheck the box.

Since this is one of the "policy" settings, I expected setting it to Disabled would have the desired effect. Any advice would be appreciated.