I just found why Fiddler2 works from time to time on my (not so) new Vista installation. It happened that the problem occurred because of my VPN connection.
Almost 99% of the time I am out of the office I am using VPN connection, because my Communication machine (another story) is located at the office. It never occurred to me that the problem in Fiddler was because of the active VPN connection. And I always blamed IE7.
Well, the problem is still IE7, but today I found the exact reason. It is actually stated in Fiddler documentation. It is first mention at Common problems and then resolution is described at Configuring clients.
The problem lies somewhere in IE. When you have active VPN connection IE takes proxy settings from that VPN connection no matter if you have “Use default gateway on remote network” option turned on or off. In my case it was off. You have to open Settings dialog of your active VPN connection and set proxy value there and Fiddler will work again.
