Also, we recently found it necessary to not only lockout access to iexplore.exe and set the connection settings to a dummy (we do not use a proxy server either), proxy server (and lock out access to the connection settings tab so they cannot change any of the settings), but also, some of our users got wise and found the executable for the "Internet Connection Wizard".
To disable the "Internet Connection Wizard" via group policy you can find that in the "Administrative Templates" followed by looking under "Internet Explorer" in the tree view. We found that using the "Internet Connection Wizard", even with the "Connection Tab" disabled, the users were able to configure a new instance of Internet Explorer to access the outside world. So for "total" security, it's necessary to lock access to this as well (also depending just how sophisticated your users really are). It took us a bit of time to figure out just how the users were accessing the internet ourselves - once we did, we were able to stop it quickly using this method.