[squid-users] Problem with squid 2.6 on a single computer as a transparent proxy

I have configured squid to run on a single computer like a transparent proxy.
I used this mail from the archive as a install guide.
http://www.mail-archive.com/squid-users@squid-cache.org/msg48149.html

Adding this as a iptables rule
iptables -t nat -A OUTPUT -o eth0 -p tcp --dport 80 -m owner --uid-owner
root -j ACCEPT
iptables -t nat -A OUTPUT -o eth0 -p tcp --dport 80 -j REDIRECT --to-port
3128

And using this as my config
http_port 3128 transparent
hierarchy_stoplist cgi-bin ?
acl QUERY urlpath_regex cgi-bin \?
cache deny QUERY
acl apache rep_header Server ^Apache
broken_vary_encoding allow apache
access_log /usr/local/squid/var/logs/access.log squid
hosts_file /etc/hosts
refresh_pattern ^ftp: 1440 20% 10080
refresh_pattern ^gopher: 1440 0% 1440
refresh_pattern . 0 20% 4320
acl all src 0.0.0.0/0.0.0.0
acl manager proto cache_object
acl localhost src 127.0.0.1/255.255.255.255
acl to_localhost dst 127.0.0.0/8
acl SSL_ports port 443 # https
acl SSL_ports port 563 # snews
acl SSL_ports port 873 # rsync
acl Safe_ports port 80 # http
acl Safe_ports port 21 # ftp
acl Safe_ports port 443 # https
acl Safe_ports port 70 # gopher
acl Safe_ports port 210 # wais
acl Safe_ports port 1025-65535 # unregistered ports
acl Safe_ports port 280 # http-mgmt
acl Safe_ports port 488 # gss-http
acl Safe_ports port 591 # filemaker
acl Safe_ports port 777 # multiling http
acl Safe_ports port 631 # cups
acl Safe_ports port 873 # rsync
acl Safe_ports port 901 # SWAT
acl purge method PURGE
acl CONNECT method CONNECT
http_access allow manager localhost
http_access deny manager
http_access allow purge localhost
http_access deny purge
http_access deny !Safe_ports
http_access deny CONNECT !SSL_ports
http_access allow localhost
acl ME src 10.0.0.5
http_access allow ME
http_access deny all
http_reply_access allow all
icp_access allow all
coredump_dir /usr/local/squid/var/cache

Squid Cache: Version 2.6.STABLE14
configure options: '--prefix=/usr/local/squid' '--enable-linux-netfilter'

But when i use lynx I get this output in the browser

 This request could not be forwarded to the origin server or to any
 parent caches. The most likely cause for this error is that:
   * The cache administrator does not allow this cache to make direct
     connections to origin servers, and
   * All configured parent caches are currently unreachable.

and this in my cache.log

2007/09/21 14:00:24| WARNING: Forwarding loop detected for:
Client: 10.0.0.5 http_port: 127.0.0.1:3128
GET http://www.nytimes.com/ HTTP/1.0
Host: www.nytimes.com
Accept: text/html, text/plain, text/css, text/sgml, */*;q=0.01
Accept-Encoding: gzip, bzip2
Accept-Language: en
User-Agent: Lynx/2.8.6rel.4 libwww-FM/2.14 SSL-MM/1.4.1 OpenSSL/0.9.8d
Via: 1.0 linux.niap.no:3128 (squid/2.6.STABLE14), 1.0 linux.niap.no:3128
(squid/2.6.STABLE14)
X-Forwarded-For: 10.0.0.5, 10.0.0.5
Cache-Control: max-age=259200
Connection: keep-alive

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