I have SquidNT set up on my home network for HTTP caching and it's working great. I want to use it as a transparent proxy server, though. Googling tells me to use Softperfect Bandwidth Manager to do the port redirection stuff that I would normally use iptables for, but it costs $99 after 30 days. I'm wondering if there is a FLOSS (or even freeware) app I can use to forward traffic outbound on port 80 to localhost:3128 on Windows XP?
Why don't you just setup squid cache on the target proxy machine? It works as a transparent proxy right out of the box (by sending x-forwarded-for headers) You can disable caching as you wish inside the config file.
You could try redirection server rinetd service available here http://www.boutell.com/rinetd/ . But am not sure it might do the stuff. You could give it a shot.
I'm doing the same thing on my server. I found Routix NetCom which does exactly that. The free version will handle the first 5 rules only, which should be enough for your needs.