Could you please ensure that the proxy configuration in the conection tab of Internet Explorer doesn't contain an entry for the port that Fiddler is listening at?
The symptoms you describe lead me to think that the proxy configuration is set and it will be valid only when Fiddler is running.
Thanks Reymarx Gereda [MSFT]- Proposed As Answer byReymarx GeredaMSFT, OwnerMonday, August 31, 2009 2:33 PM
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