I thought that I had a better handle on netfilter but i guess not.
Well here's my setup

local_net=10.0.0.0/24
iptables-box-eth1=10.0.0.2
iptables-box-eth0=10.0.1.2
adsl-router=10.0.1.1
squid-box=10.0.0.3


         internet
            |
       adsl-router [NAT-enabled]
            |
       iptables-box [NAT]
            |
            |
     +------+------+-----------+
     |             |           |
 squid-box      client1     client2
  10.0.0.3       10.0.0.4    10.0.0.5

Before installing the squid all clients could browse the internet.
After installing the squid I pointed client1 browser's proxy setting to the
squid ip and it was able to browse the internet

I then ammended my fw script to do the following (as per the
transparent-proxy HOWTO)

iptables ?t nat ?A PREROUTING ?i eth0 ?s ! squid?box ?p tcp ??dport 80 ?j
DNAT ??to squid?box:3128
iptables ?t nat ?A POSTROUTING ?o eth0 ?s local?network ?d squid?box ?j SNAT
??to iptables?box
iptables ?A FORWARD ?s local?network ?d squid?box ?i eth0 ?o eth0 ?p tcp
??dport 3128 ?j ACCEPT

I getting the following error whenever I try to browse a website

ERROR
The requested URL could not be retrieved

----------------------------------------------------------------------------
----

While trying to retrieve the URL: sitename.com

The following error was encountered: 

Access Denied. 
Access control configuration prevents your request from being allowed at
this time. Please contact your service provider if you feel this is
incorrect. 

Your cache administrator is root. 


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