I thought I would post this howto as I was unable to install WindowsLive services behind proxy for a long time even when I had it set up in Iexplorer. Windows Update was also working fine without his tweak. Anyway, let me cut to the chase, here is the "thousand words":
Don't forget to run cmd as Admin. If yu want to purge the settings, type reset.
Here is the source, not to take the credits for the info:)
