Here is the settings.xml proxy section with proxy host\port changed to a garbage value:
<proxies>
<proxy>
<id>optional</id>
<active>true</active>
<protocol>http</protocol>
<host>proxy.myhost.com</host>
<port>8080</port>
</proxy>
regarding the arguments, I just appended them on the command line as such:
bin/karaf.bat -Dhttp.proxyHost=127.0.0.1 -Dhttp.proxyPort=80
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