Recently I moved, I'm not longer able to get broadband. I use E-smith 4.1.2 on a very old P90 laptop with an external modem attached. I've configured dial-on demand to use the Short setting.
Cyrus is correct, the Never, Short, Medium, Long, and Cont. settings affect how long you stay connected during periods of no traffic.
With my setting set to short, it disconnects about 3 to 5 minutes after no data has been send/received. When I initiate a internet request (ping, web, ssh, anything requiring outside access) it starts to dial..and stays connected as long as I am surfing.
I've disabled SQUID because I'd rather have raw access to the pages and let my client browser do the caching as necessary.
Hope this helped,
Nathan