The code sample at the end is incorrect .here is the correct version. it is usesystemdefault without the 's'.
<configuration>
<system.net>
<defaultProxy>
<proxy
usesystemdefault="true"
proxyaddress="http://192.168.1.10:3128"
bypassonlocal="true"
/>
<bypasslist
<add address="[a-z]+\.contoso\.com" />
</bypasslist>
</defaultProxy>
</system.net>
</configuration>