Did you happen to look at the file contents when it "finished"? Maybe it contains a clue to what goes on...Download indicator went form 0% to 100% in less than a second and confirmed a download size of 554 bytes in 1 sec.
I just tried that link with IE6, and it started downloading. The progress bar was full from the start though, but I let it run for about 15 seconds and it definitely was downloading something. Canceled it after about 4 MB had downloaded. I'm running Squid 2.6Stable5, but it's the Debian Etch version, so it could well have a number of patches applied.
Could the problem be a combination of changes made in Squid and patches MS have rolled out?
TB