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When using a proxy to request URLs that require Digest Auth,
a header similar to the following is sent to the server:
Authorization: Digest ... uri="http://example.org/foobar/spam" ...
The server then responded with:
HTTP/1.1 400 Bad Request
Server: Microsoft-IIS/6.0
When not using a proxy, the header sent will look like:
Authorization: Digest ... uri="/foobar/spam" ...
and the server responded as expected with a 200 OK.
I don't know what is at fault here, urllib2 or IIS,
but patching the urllib2 to not use the full URL, when creating 
the Digest Auth. header, works.
When a proxy is being used by urllib2, the Request's get_selector() will
always return the full URL instead of just the selector.
The code that creates the Digest auth. header also uses the
get_selector() to set the "uri="-part in the auth header.
Making sure that the "uri="-part is not a full URL all seems to work.
See the patched urllib2.py attached.
I have only tested the fix against the server I had problems with,
and it seems to be working.

As it's not actually known whether urllib2 or IIS is at fault, I suggest this is closed, it can always be reopened.

This might be related to issue2202 as well.

jan.kollhof, thanks for the report and your work on this ticket!
The format of the client response to a server's digest challenge is detailed in RFC 2617, section 3.2.2: The Authorization Request Header.
The urllib2.py attachment is unfortunately the whole file and not a diff, but I think from the transcript in msg74918 that Jan is discussing the format of the digest-uri header. That field is in turn defined in RFC 2616, section 5.1.2: Request-URI.
 Request-URI = "*" | absoluteURI | abs_path | authority
 The absoluteURI form is REQUIRED when the request is being made to a
 proxy.
So I believe urllib2 has the correct, RFC-conforming behavior here by sending the full URI through a proxy, and the issue is with IIS.
Thus, I recommend that we close this ticket as invalid.

Yes, RFC specifically states that "The absoluteURI form is REQUIRED when the request is being made to a proxy." Thanks Jessica for making a note of that. Closing this issue as Invalid.