Comment 29 for bug 446552

 ==> check that env contains http_proxy setting
administrator@ubuntu-box-1:~$ sudo sh -c export
.
. content deleted from brevity
.
export http_proxy='kgnews:#####@http://proxy.ourproxy.org.au:3128'
 ==> yes, env is set with username and password and pointing to the proxy
 ==> then run update
administrator@ubuntu-box-1:~$ sudo DEBUG_UPDATE_MANAGER=yes update-manager
MetaRelease.__init__() useDevel=False useProposed=False
/etc/update-manager/meta-release: http://changelogs.ubuntu.com/meta-release
/etc/update-manager/meta-release: http://changelogs.ubuntu.com/meta-release-lts
/etc/update-manager/meta-release: -development
/etc/update-manager/meta-release: -proposed
metarelease-uri: http://changelogs.ubuntu.com/meta-release
MetaRelease.download()
NO self.metarelease_information
MetaRelease.__init__() useDevel=False useProposed=False
/etc/update-manager/meta-release: http://changelogs.ubuntu.com/meta-release
/etc/update-manager/meta-release: http://changelogs.ubuntu.com/meta-release-lts
/etc/update-manager/meta-release: -development
/etc/update-manager/meta-release: -proposed
metarelease-uri: http://changelogs.ubuntu.com/meta-release
MetaRelease.download()
NO self.metarelease_information
/var/lib/python-support/python2.6/dbus/connection.py:242: DeprecationWarning: object.__init__() takes no parameters
  super(Connection, self).__init__(*args, **kwargs)
administrator@ubuntu-box-1:~$

The result in Update Manager is "Your system is up-to-date" and no upgrade button is presented.
and a check of the Squid access.log shows that no connection attempt was made to http://changelogs.ubuntu.com
This is with Michael's second patch applied.