.pac fails with 5.0

Customer reports an issue with a .pac file, like

proxy.pac

function FindProxyForURL(url, host) {
 return "PROXY host1:80; PROXY host2:80";
}

When host1 is down, the proxy goes to host2. This works fine with 6u11. This fails in 1.5.0_14->17. The stack trace shows host1. When host1 is down, it should go to host2. I do not see host2 in the stacktrace. It seems the proxy went from host1 to DIRECT. It never checked for host2.

The customer suspects bug 4480339. I think that is unlikely as this bug was fixed in 1.4.1. Is it this bug?

So why did 5.0 miss host2?
Additional info from customer after finding that the workaround does not work for them. For some reason, they cannot set Java configuration to "use browsing settings". It stays at

javaplugin.proxy.config.type = auto

Reading the last responses, I always had the impression that something is wrong with my system (or that my environment has something particular which causes it to work incorrectly).

However, we know that our customers have tried the same 'workaround' without success.

So, I still don't understand what could be different in the environment of Sun which causes it to work at their side.

Maybe some additional information which might be useful: when testing this here we use a system with no Java 6.0 installed. Maybe the behaviour is different when using 5.0u17 and having Java 6.0 installed. We have noticed this in the past that in this case the Java 5.0 VM runs with the 6.0 plug-in (at least that is what I understand), and this can cause a different behaviour). I'll try to test this shortly.