Problem with local_ip and local_domain in 1.0.7

I've just installed squid-1.0.7 and I can't seem to get local_ip or
local_domain to work correctly.

My conf file contains:

local_domain indigo.ie
local_ip 194.125.133.0
local_ip 194.125.134.0

[I've also tried 194.125.133.0/24 194.125.134.0/24]

config is otherwise fairly normal (no parents or peers yet).

The local IP stuff is intended to catch virtual servers to save me
listing all the domains.

Yet, neither seems to work. When I access http://www.indigo.ie/XXX/,
the stuff seems to be cached and returned with TCP_HITs later.

Similarly, if I try a virtual web server, the local_ip stuff doesn't
kick in. In fact, every line in hierarchy.log contains DIRECT. I've
tried turned up the debugging in cache_cf.c, to catch the ip matching
for local_ip, but I don't see anything turning up.

Any ideas where I should look for the problem?

--
Alan