When using Kerberos authentication, clients using the proxy need to reference the proxy by host name, not by IP address.
The proxy.pac
file that is generated on the Smoothwall will auto-generate depending on the way it was requested.
http://<Smoothwall_IP_address>/proxy.pac
will have the IP in the proxy statement.
http://smoothwall.yourdomain.local/proxy.pac
will have the FQDN in the proxy statement.
Setting clients to use: http://smoothwall.yourdomain.local/proxy.pac
as the configuration script should fix this issue.