No. It doesn’t. ClickOnce only supports proxy authentication using the default credentials, i.e. Windows Integrated Security, i.e. the Windows account information.
System.Net's default web proxy has [UseDefaultCredentials] turned off by default. You'll probably have to turn this on by modifying the machine.config file. If the ClickOnce deployment itself does not require a proxy server, but the application does, you
can add an entry to the app.config file instead.
If the <defaultProxy> element in the machine.config is empty, it uses the settings from IE -- but this applies to calling something via a proxy server, not to installing the ClickOnce app itself.
But there is a workaround for the issue. Look at this blog.
http://bronumski.blogspot.com/2009/06/clickonce-updates-via-authentication.html It uses a programmatic way to work around the issue.
Related topic:
http://social.msdn.microsoft.com/Forums/en/winformssetup/thread/3e9cebad-9630-4bbc-a0ca-0d2f20335454
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