Bah the problem is me obviously.
Code:
	g_hRoot = InternetOpen("test", INTERNET_OPEN_TYPE_PROXY, "http://proxy", "8080", 0);
Should be
Code:
	g_hRoot = InternetOpen("test", INTERNET_OPEN_TYPE_PROXY, "proxy:8080", "<local>", 0);
Despite the fact I was staring at MSDN til my eyes hurt i still managed to miss that. It was only when I finally got a 400 Bad Request response that I tracked down where i was going wrong.... cheers anyways peeps...