I thought I would add in my $.02 worth here. I know this article is a bit old but anyone searching for the solution just might end up reading this.

So here goes:

You CAN authenticate again an MS proxy server in any application that will ask for the at least the username password. Internet Explorer has an NTLM module built-in that will allow you to authenticate with username, password and domain. This last bit is the real clincher. How do you authenticate to a domain with only a username/password dialog?

Solution:

Enter your domain as part of the username like this:
domain\username

Problem solved.

In Mac OS X Panther, Apple was added authentication to proxy servers down to the network level where it belongs. The same trick applies to Panther for domain authentication. Eventually Apple will probably add NTLM authentication (send them that feedback!) but in the meantime this works.

I wish this DID solve the problem. Neither Safari, nor any iApp will work over our MS network. I have tried every permutation of DOMAIN\username,
DOMAIN/username, username@domain.com .net .co.uk .org .sch.uk and so and to NO avail.

I have to use FireFox because at least it asks me for my username and password, which Safari does not.

Nigel