I have an installation of Drupal 7.20. I've entered the proxy settings in the default.settings.php but it's still unable to check on updates. A simple test with a dummy page which executes
http://updates.drupal.org/release-history/drupal/7.x?version=7.20')); ?>
Results in the following error message
object(stdClass)#62 (2) { ["code"]=> int(-110) ["error"]=> string(20) "Connection timed out" }
Which leads me to believe the proxy settings are not being detected