I had a chance to do some more research on this topic and I think I came up with a work around for the problem. It was only tested with squid proxy server since it is the only proxy server our client uses at the moment. The work around is quite dirty but it works. I won't post the entire solution since it is pretty simple. Thanks to the mechanism of native extensions introduced in AIR 3.0 I could develop a native Windows extension that intercepts ws2_32.dll send() call and corrects the CONNECT request by removing the trailing space character. The call interception is made by the detours library.
Hope that the proxy issue will be resolved in future versions of Adobe AIR and Flash player.