Don't send localhost traffic to the proxy, there is no way that the MWG can route that back for you. If you want instructions on that, google "localhost through proxy" (this is not an attempt at sarcasm, genuinely trying to help). You'll find how to bypass local addresses from hitting the proxy.
When you tell any computer to connect to "localhost" you're basically saying "talk to yourself" (all traffic would stay on your machine). Your proxy settings must be set to ALWAYS use the proxy for everything, so when you send a request for "localhost", instead of "talking to yourself", you're telling the proxy to "talk to yourself" (that actual request goes to the proxy instead of staying on your machine).
The MWG isnt blocking you on purpose, it just would never be able to process that request in the way you want it to.