The problem is that IE won't reset the proxy settings until it either
Below is the code that I've used to get this working:
function Refresh-System
{
$signature = @'
[DllImport("wininet.dll", SetLastError = true, CharSet=CharSet.Auto)]
public static extern bool InternetSetOption(IntPtr hInternet, int dwOption, IntPtr lpBuffer, int dwBufferLength);
'@
$INTERNET_OPTION_SETTINGS_CHANGED = 39
$INTERNET_OPTION_REFRESH = 37
$type = Add-Type -MemberDefinition $signature -Name wininet -Namespace pinvoke -PassThru
$a = $type::InternetSetOption(0, $INTERNET_OPTION_SETTINGS_CHANGED, 0, 0)
$b = $type::InternetSetOption(0, $INTERNET_OPTION_REFRESH, 0, 0)
return $a -and $b
}