I rechecked and have 12080 in the field. I have one more question.
Why does the help file in Avast tell us to do this:
"Check the option Use a proxy server for your LAN
Write localhost into the Address field (alternatively, you can enter IP address 127.0.0.1, which is the same as localhost).
Enter 12080 into the Port field. "
and the tutorial tell us to click
Advanced on the same page (server page) and put the information on the
Proxy servers page making sure the
Use Proxy Server for all Protocols is not checked.
If you do what Avast tells you all the options have the information and there is a check in the
Use Proxy Server for all Protocols box.\
but if you do what the tutorial says, only the http option has the localhost:12080 information.
Which is correct and why?

BTW I found the tutorial here:
http://forum.avast.com/index.php?topic=15573.0