Somewhere I got the suggestion I should use -proxy=127.0.0.1:9050 in the command line, but it looks like it won't run with that setting.
That command makes Bitcoin run via TOR if that is availabe. TOR makes it impossible to trace a transaction to your IP address, since communication travels through a chain of 3 proxy servers. If TOR is not running on the same computer, it doesn't work, as you have observed.