I was programming an proxy server and I noticed mIRC does not even attempt to connect to it when set in the options. Using the new miRC 7.65

I just tested the proxy feature in mIRC with FreeProxy and WinGate and it worked fine with both of them.

The proxy functionality works with the mirc I installed in to "~\Documents\mirc765\mirc\mirc.exe" but not with the one installed to "c:\program files (x86)\mirc\mirc.exe" with portable option disabled.

I am connecting to 127.0.0.1 on port 12345

It doesn't look like the connection attempt is blocking. It is a very rapid Unable to Connection error message.

I disabled Avast protection for 10 minutes during the test.

Try running that mirc.exe with admin right, if it works, it would be because you're using mirc.exe from a directory where you cannot do anything without such right.

Running it with admin rights didn't help. I also tried older versions of mirc and they also did *not* work from the C:\Program Files (x86)\mIRC\ folder.
I also cannot /sockopen test 127.0.0.1 12345 but if mIRC is anywhere else it works just fine.

This means that something on your computer is blocking the mIRC installed in the program files folder from connecting to the proxy.

Note that some anti-virus software will continue to run in the background to block what it considers critical issues even if you disable them.