Transparent Proxy problem

I am SURE this is not a squid issue, but since squid is readily showing me the problem, I thought I would ask here for a direction to go in. This problem is really killing me. <grin>

On one of my boxes that I have set up for transparent proxy, here is what happens:

When outgoing connections to port 80 are redirected with ipchains to port 8080, it appears that either the kernel or ipchains is not only passing the http request off to squid on 8080, but is also telling squid that the destination port is 8080!!

For example, when the client requests the page: http://oas.courant.com/name_of_page.html the squid access.log log reports:

10.31.10.27 - - [21/Jul/2000:10:22:58 -0400] "GET http://oas.courant.com:8080/name_of_page.html"

And the request never makes it through for the obvious reason that the courant.com web server is not responding on port 8080, but rather the standard port of 80.

The kernel is 2.2.14, with transparent proxying enabled, ipchains is latest rpm (just updated last night)

Can someone point me to a likely cause/resolution?

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Bill Arlofski