One of our developers is using http to connect to TFS. When he adds new forms to his project they don't get automatically added to his source control project, nor is there any right click menu item to add it. If we try to drag one of the new files from file explorer, the hour glass goes on for a while, but nothing happens and file is not added to source control. Are we doing something wrong or is this a know bug?

We have developer who is a not a US citizen, so our corporate security requirements, require him to work outside our firewall, which necessitates his using http to connect to our TeamServer project. Out of the box VSTS is supposed to support http connections. We are just finding that it seems to be a bit flakey and tempermental, particularily when new items are created in his project.

I do not know what SourceControlProxy is, nor do I see any documentation about it.

First of all I would activate tracing for Source Control operations, you can do this editing the Program Files\Microsoft Visual Studio 8\Common7\IDE\devenv.exe.config file before the closing </configuration> tag, and add the following:

<appSettings>
<add key="VersionControl.EnableSoapTracing" value="false" />
</appSettings>

<system.diagnostics>
<switches>
<add name="TeamFoundationSoapProxy" value="4" />
<add name="VersionControl" value="4" />
</switches>
<trace autoflush="true" indentsize="3">
<listeners>
<add name="myListener"
type="Microsoft.TeamFoundation.TeamFoundationTextWriterTraceListener,Microsoft.TeamFoundation.Common, Version=8.0.0.0, Culture=neutral, PublicKeyToken=b03f5f7f11d50a3a"
initializeData="c:\traceTFS.log" />
</listeners>
</trace>
</system.diagnostics>

After this, restart Visual Studio, and try the sam actions again and search for web requests in the trace for for checkout ,"PendChange" calls and Checkin.

Anyway, yes there has been improvements in SP1, maybe that helps

Source Control Proxy, only has sense in distributed scenarios, you can take a look for info about it in MSDN and the documentation of Team Foundation Server.

I put here also a link about accesing TFS remotely which maybe can help http://forums.microsoft.com/MSDN/ShowPost.aspx?PostID=264691&SiteID=1