The answers to most of these questions are in the manual, I encourage you to get yourself a copy from one of the e-smith FTPs. I did.
You didn't say what browser you are using so I'll have to make this generic.
Basically, to connect using the proxy you have to get into the internet options for you browser (under tools for Microsnot IE). It should have some sort of connections tab there to setup your connections. When you get there, You just select proxy server and put in your e-smith computer's inside IP addy along with port 3128 in the spot provided and waa laa! Proxy! BTW, there is a better way that works on most setups, but you did specifically ask about the proxy. (the manual has more info!)
as far as telling if the modem is connected or not from the ws. I don't have an answer for that, I usually just open the browser and see if I have internet access.
I believe that the e-smith software in dial-up server mode defaults to having an idle time auto-disconnect already setup.