Someone at work inherited my old development machine and was setting up Visual Studio 2008 and 2010 for his identity.
They could add our TFS server from the VS2010 instance, but not from the 2008 visual studio – VS gave an error saying that the Team Foundation server does not exist.
I stepped in to help get it configured, and as a debugging step asked him to run Wireshark and catch the network traffic.
As soon as we couldn’t find the TFS Server’s IP address in the trace I could see what the issue was. VS is using the system proxy settings, and then asking the proxy server to connect with TFS. This fails on our network, because our proxy does not have visibility of our internal network for security reasons.
As soon as we put in a proxy bypass for local addresses, we could add the TFS Server and all was well.
I would imagine that VS2010 either has its own local address check and then bypasses the proxy, or bypasses the proxy on failure. Either way, it wasn’t bothered by the proxy configuration being incorrect.