When Autoproxy configuration script is used for Proxy setting with http URL
for the proxy script Java Plug-in doesn't recognise the autoproxy and uses
a direct connection.This is seen when settings in the Control panel is enabled
to use "browser proxy" and specify the http URL for the proxy script or
using specifying the proxy script in the Java Plug-in Control Panel.
Control Panel->Proxy->Enter the URL for proxy script (auto proxy configuration URL)

To reproduce the problem:

1. Install java Plug-in Merlin build81

2. Invoke the Java Plug-in Control Panel.

  Control Panel -> disable -> user browser proxy.
  Enable Show Java Console in basic pnael.

3. Enter the following URL in the automatic Proxy URL text field and apply.

  http://javaweb.sfbay.sun.com/~sridhare/proxy.pac

4. Load the following applet .

  http://sqesvr.sfbay.sun.com/deployment1/ws/tests/autotests/mimetypes/testcases/Test_13.html

In Java Console you see and message showing Using Direct Connection Instead of showing using auto proxy message and proxy server mention in the script to use.

(OR)

choose the to use "Browser Proxy Settings" and enter the autoproxy URL in the
browser preferences and load the above applet is also same behaviour.