This setting "Make proxy settings per-machine (rather than per-user)" exists in Group Policy and is referenced in the Windows Delivery Optimization documentation at this link.
When this setting is enabled, Windows will read and apply user web proxy configuration from the HKEY_LOCAL_MACHINE registry hive instead of the HKEY_LOCAL_USER hive.
For example, to set a per-machine proxy configuration that uses an explicit proxy PAC URL, enable the setting "Make proxy settings per-machine (rather than per-user)" and set a registry value in Computer Configuration/Preferences/Windows Settings/Registry as below:
Hive: HKEY_LOCAL_MACHINE
Key Path: SOFTWARE\Microsoft\Windows\CurrentVersion\Internet Settings
Value name - AutoConfigURL
Value type - REG_SZ
Value data - http://yourproxy.yourdomain:port/yourproxy.pac
There are other Internet connection settings normally pulled from HKEY_CURRENT_USER\SOFTWARE\Microsoft\Windows\CurrentVersion\Internet Settings which can also be set in HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\Windows\CurrentVersion\Internet Settings when "Make proxy settings per-machine (rather than per-user)" is turned on (although most IE settings no longer apply with Edge Chromium.)
This is not the same as configuring the proxy for WINHTTP, nor is it writing the configuration to the .DEFAULT user hive. Also, there's no need to use loopback processing mode in order for this setting to work.
Hopefully this helps someone else trying to set up machines behind a corporate proxy.