I, too was having problems with the web shield using Zone Alarm and trying to retrieve Yahoo mail. I set up the localhost/port 12080 solution in my Lan settings and now have several questions:
1) Once you set up the proxy server, am I correct in assuming that you have to uncheck "automatically detect settings"?
2) Can someone explain how using port 12080 won't slow down the connection to the net? Logically, it means that you are just opening one outside port instead of allowing your computer to search all ports.
3) Do I have to make any adjustments in Zone Alarm for this proxy server setting?
4) What exactly does the webshield do that Zone Alarm doesn't?